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Some States Limit How Uninsured Pay For High-Risk Insurance

Mar 19, 2012

The "uninsurables"-- people with serious medical conditions who can't buy health coverage on the private market -- are supposed to have a safety net to rely on in the new preexisting condition insurance plans (PCIPs). These comprehensive plans, created by the federal health care law, take all comers who have been uninsured for at least six months. The premiums can be expensive, however, running several hundred dollars a month.

In many states, people with medical conditions such as HIV/AIDs, hemophilia, kidney disease and cancer can get a helping hand from government programs or nonprofits that pay the PCIP premiums on their behalf. But a handful of states have decided to prohibit third parties from picking up the tab.

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Iowa is one of them, and in recent months the situation there has generated plenty of public controversy.

Some Iowa health officials would like to use federal funds from the AIDS Drug Assistance Program to pay the PCIP premiums for residents who have HIV/AIDS. That way, these people could receive coverage for doctor visits and other medical needs in addition to drugs.

"When [officials] announced the PCIPs, they conveyed that this would be one of the solutions for people with HIV," says Randy Mayer, the Iowa public health bureau chief in charge of HIV, sexually transmitted infections and hepatitis. He estimates that at least 100 people, and "probably considerably more," could benefit.

But the board that runs the Iowa PCIP sees the situation differently. "We've been given a certain amount of money to manage this program, and we don't know what will happen if we run out," says Cecil Bykerk, the executive director of the board that manages the Iowa program. Bykerk, a former chief actuary in the insurance industry who has extensive experience working with state high-risk pools, also oversees the programs set up by Montana and Alaska.

Overall, the PCIP program received $5 billion to fund plans nationwide until 2014, when insurers will be required to cover everyone regardless of their health. Although only 49,000 have signed up, far fewer than originally projected, those who are enrolled have higher medical costs than expected.

Iowa was allocated $35 million until 2014 and used about $4 million by the end of last year, less than they had expected. By April 1, the Iowa plan will have 282 members, "slightly under" projections for this time, says Bykerk. 

A number of states, including Alaska and Montana, have overrun their spending projections and asked for and received additional federal funding. But Bykerk doesn't want to risk that in Iowa.

"Being unsure of all this, the board is hesitant to move forward and ask to amend the contract to permit third-party payment," he says.

There are legitimate reasons why states have concerns about third-party payments: If an employer or insurer is permitted to pay someone's PCIP premium, for example, it may be tempted to dump people into those plans rather than insure them and absorb the cost of their care. Likewise, hospitals and other health-care providers might benefit financially by paying the premiums for people with serious medical needs, thereby encouraging them to receive care at those institutions, including possibly unnecessary care.

The federal government runs the PCIPs in 23 states and in the District of Columbia. Those jurisdictions permit third-party payment, at least for now. In its guidance on the plans, the Department of Health and Human Services says it will monitor such payments closely, and "to the extent that HHS finds that these payments present conflicts of interest or contribute to greater than projected spending, HHS anticipates that it will issue further guidance that restricts or even prohibits third-party payments for premiums."

The remaining 27 states run their own PCIPs with federal dollars. A handful of them don't allow third-party payment, according to HHS. They include: Arkansas, Connecticut, Iowa, Maine, Montana, Pennsylvania and Rhode Island. Frequently, states followed the third-party payment rules they had in place for their own high-risk pools, which also cover people with pre-existing conditions but don't target the uninsured to the same degree.

In New Mexico, about 11 percent of the 950 people enrolled in the PCIP get their premiums covered by such third parties as the American Kidney Fund, the University of New Mexico and the New Mexico Department of Health, says Deborah Armstrong, executive director for the New Mexico Medical Insurance Pool, which is both the PCIP and the state high-risk pool.

The state's original enrollment projection was just 650 to 700, so as more people have signed up, "they're just adjusting our contract for what we need," she says.

A year ago, Eli Valdez, 36, had full-blown AIDs. Uninsured and earning just $1,000 a month as a cashier at a pizza parlor, he had racked up more than $35,000 in medical bills. The $1,600 he needed monthly for prescriptions was covered by the state, but because he couldn't afford physician visits or blood work, the Albuquerque resident wasn't monitoring them as he should have.

Now he has comprehensive insurance through the New Mexico PCIP, for which the nonprofit community group New Mexico AIDS Services pays the $336 monthly premium.

"Now I have more access to health care, and I get seen more often," says Valdez. "I'm a lot healthier." His viral load is now undetectable.

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This column was updated to delete Kansas and Oklahoma from the list of states that do not accept third-party payments based on information from state officials.

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