PCIPs Generally Had Similar Cost Sharing, but Varied in Coverage Limits, Premiums, and Criteria for Demonstrating Pre- Existing Conditions

Health insurance plans offered by state- and federally run PCIPs  generally had similar cost sharing features. For example, the most popular plans available in most states  had annual deductibles ranging from $1,000 to $2,999, out-of-pocket  maximums at or near the legal maximum of $5,950, and coinsurance of  20 percent. In 2011, almost all state- and federally run PCIPs had coverage limits for  some benefits; however, the selected benefits and the extent of coverage  limits varied. As of June 2011, the average monthly  premium for a 50-year-old person was $407 across all states, ranging  from $240 in Utah to $1,048 in Alaska. Until July 1, 2011, applicants for the federally run PCIP generally had  fewer options available to demonstrate their eligibility based on a pre- existing condition than did those in the state-run PCIPs. PCIP Enrollment and Spending Remain Significantly Lower Than Initial Projections, Though Enrollment Has Increased Steadily

As of April 2011, enrollment in state- and federally run PCIPs was  significantly lower than projected, though it has increased steadily. By November 2010, after about 4 months of coverage, total PCIP  enrollment was about 9,000, and increased to nearly 21,500 by April  2011, ranging from 0 in Vermont to nearly 3,200 in Pennsylvania. We found that lower than expected enrollment may be attributed to five  factors: (1) the statutory requirement that applicants be uninsured for   6 months prior to applying, (2) affordability concerns, (3) a lack of  awareness about the program, (4) the processes used for determining  eligibility, and (5) existing state laws or state-supported health insurance  programs. In efforts to improve the affordability of PCIP coverage and to increase  awareness of the program, CCIIO lowered PCIP premiums and undertook  additional marketing and outreach efforts beginning in 2011. Specifically, state- run PCIPs collectively expended about $78 million as of March 31, 2011,  and HHS expended almost $26 million for the federally run PCIP and  about $1.6 million for its own administrative expenses, which together  represented about 2 percent of the total $5 billion appropriation. Three federal agencies—CCIIO, OPM, and HHS Office of Inspector  General (OIG)—are currently engaged in or planning oversight activities. CCIIO Established Contracts Intended to Ensure Key Program Requirements Are Met

The contracts HHS signed with states and GEHA to provide PCIP  coverage are a primary means to ensure that the state- and federally run  PCIPs are implemented efficiently and as intended. For example, state-run PCIPs are  contractually required to:  verify that the enrollee meets all PCIP eligibility criteria;  implement disease and utilization management procedures to ensure  enrollees receive necessary but cost-effective care;    establish a detailed claims database that tracks each covered service;   develop operating procedures to detect and report to CCIIO  incidences of fraud, waste, abuse, and insurer dumping;    notify CCIIO if enrollment reaches 75 percent of projected levels or if  the state expects its expenses to exceed its allotted funding, and  develop a mitigation strategy to control costs, which may include  raising premiums, reducing benefits, or capping enrollment, as  approved by CCIIO;  submit monthly cost reports—certified as being accurate and  complete—with information on administrative expenses, paid claims,  premiums collected, and withdrawals from HHS;    provide CCIIO with an independently audited financial report detailing  all PCIP finances by June 30 of each year, 2011 through 2013, in  accordance with the state’s standard accounting practices or  generally accepted accounting principles. While ultimately responsible for the entire program, CCIIO also relies on  OPM in its capacity as administrator of the contract with GEHA to perform  oversight. HHS also provided technical comments, which we incorporated  as appropriate. Appendix II: Premiums for the Most Popular Pre-Existing Condition Insurance Plans (PCIP) by State, June 2011

Appendix III: Criteria for Demonstrating a Pre-Existing Condition by State, June 2011

State-run Pre-Existing Condition Insurance Plans (PCIP)

Appendix IV: Enrollment and Expenditures for State- and Federally Run Pre-Existing Condition Insurance Plans (PCIP)

Appendix IV: Enrollment and Expenditures for  State- and Federally Run Pre-Existing  Condition Insurance Plans (PCIP)

	State

Legend: N/A = Not applicable  For the federally run PCIP states, administrative expenses and federal reimbursements were not  available on a state-by-state basis.
Why GAO Did This Study

Individuals applying for health insurance are often denied coverage due to a pre-existing condition. The Patient Protection and Affordable Care Act appropriated $5 billion to create a temporary pool--known as the Pre- Existing Condition Insurance Plan (PCIP) program--to provide access to insurance for such individuals until new protections take effect in 2014. Twenty-seven states opted to run their own PCIPs, while 23 states and the District of Columbia opted to let the Department of Health and Human Services (HHS) run the PCIPs for their residents. Initial projections of total enrollment varied from 200,000 to 375,000, and questions have been raised about funding, implementation, and oversight of this new program. GAO examined (1) PCIP features, premiums, and criteria for demonstrating a pre-existing condition, (2) trends in PCIP enrollment and spending, including administrative costs, and (3) federal oversight activities. GAO reviewed PCIP benefits and rates; interviewed officials from selected state PCIPs, HHS, and the Office of Personnel Management (OPM), which assists HHS in administering aspects of the federally run PCIP; analyzed data provided by HHS and OPM; and examined contracts and interagency agreements. In its comments, HHS emphasized its recent efforts to increase enrollment and provided technical comments, which GAO incorporated as appropriate.

What GAO Found

State- and federally run PCIPs generally had similar cost sharing arrangements, although other features varied. Most states had annual deductibles falling within $1,000 to $2,999, with out-of-pocket limits at or near $5,950. Coverage limits were common but varied, both in terms of the benefits affected and the extent of the limits. Monthly premiums ranged considerably--from $240 in Utah to $1,048 in Alaska for a 50-year-old enrollee--and were generally lower in the federally run PCIP. Additionally, applicants in the federally run PCIP generally had fewer options to demonstrate a pre-existing condition--a criteria of program eligibility-- than did those in the state-run PCIPs. Enrollment and spending for state- and federally run PCIPs have been significantly lower than initial projections. As of April 30, 2011, enrollment had exceeded 21,000, ranging from 0 in one state to nearly 3,200 in another state. Factors contributing to low enrollment include the statutory requirement that enrollees be uninsured for 6 months prior to applying; premiums that may be unaffordable to many; and a lack of PCIP awareness. In response, HHS reduced premiums in the federally run PCIP states and increased its outreach efforts in 2011. Spending was also lower than projected--about 2 percent of total program funding had been spent, or about $78 million by state-run PCIPs and $26 million for the federally run PCIP. To provide for program oversight, HHS established contracts with states and the carrier selected to provide benefits for the federally run PCIP, which include numerous provisions to ensure program requirements are met. For example, the contracts require regular reporting of expense and enrollment data, and annual completion of independently audited financial reports. Also, HHS and OPM are engaged in ongoing oversight activities, such as reconciling the reported data, and HHS intends to conduct performance audits in the future.