Preexisting conditions were previously used as cause for exclusion from private insurance coverage on the individual insurance market in the United States. Congress changed this with the passage of the Patient Protection and Affordable Care Act (PPACA), which offers a two-phase solution for these patients: a temporary insurance plan for uninsured individuals with pre-existing conditions from 2010-2014, and a prohibition against denying coverage for such individuals after 2014.
According to PPACA, “essential health benefits” fall into the following general categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. The change to pre existing condition insurance coverage requirements were part of the overarching effort of PPACA to provide coverage to 95% of all Americans. By one estimate, 57.2 million non-elderly citizens have a preexisting condition that might have resulted in a denial of coverage if coverage had been sought on the individual insurance market before March 2010.
Individuals with preexisting conditions are more likely to need high-cost health care services, and therefore more likely to purchase health insurance. Insurers call this adverse selection. Insurers considered these individuals to be “high risk”, and historically tried to prevent adverse selection by either denying coverage or excluding coverage of treatment for the pre existing condition. As a result, these individuals forgo care or become bankrupt seeking treatment for their conditions. In response, PPACA contains several measures to ensure that individuals with diseases that might be considered pre existing conditions when seeking insurance receive coverage. First, the Act establishes an interim Pre Existing Condition Insurance Plan (PCIP) to be operated at the state-level from July 1, 2010 to January 1, 2014. Second, as of September 2010, insurers (except in grandfathered individual health insurance plans) are required to cover children under 19 with pre existing condition and are prevented from dropping policyholders if they get sick. Third, as of January 1, 2014 all health plans will be prohibited from discriminating against or charging higher rates to any individual on the basis of preexisting conditions. Eligible individuals are those who are a U.S. citizen or a legal resident; have a pre-existing medical condition; have not been covered under creditable health coverage for the previous six months before applying for coverage. The preexisting condition requirement can be met by demonstrating: a health-related refusal of insurance coverage, an offer of coverage with a preexisting condition exclusion, the existence or history of a medical condition specified by the Department of Health and Human Services (HHS) and documented with a clinician’s note, or other criteria as developed by a PCIP program and approved by HHS.
Twenty-nine states plus the District of Columbia chose to operate their own plans, while HHS will administer the program in the remaining 21 states. HHS-operated plans began enrollment on July 1, 2010 for coverage starting August 1, 2010. Plans must offer comprehensive coverage with an actuarial value of 65 percent of total allowed cost and with out-of-pocket limits no higher than those permitted for high-deductible health plans accompanying health savings accounts. Premiums must be set at a standard rate for a standard population, and cannot vary based on age by a factor of more than 4 to 1. Nevertheless, premiums will vary from plan to plan, affected by the age of applicants, state of residence, family composition and smoking status. Interim final regulations effective August 27, 2010 clarify that PPACA “prohibits any preexisting condition exclusion from being imposed by group health plans or group health insurance coverage and extends this protection to individual health insurance coverage. This prohibition generally is effective with respect to plan years…beginning on or after January 1, 2014, but for enrollees who are under 19 years of age, this prohibition becomes effective for plan years…beginning on or after September 23, 2010.” Until that time, the HIPAA rules regarding pre existing condition exclusions continue to apply, wherein preexisting condition is defined as “a limitation or exclusion of benefits relating to a condition based on the fact that the condition was present before the date of enrollment for the coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before that date.”
Additional protections for individuals with preexisting conditions are implemented with the interim rules. For plan years beginning on or after September 23, 2010, group health plans and health insurance issuers are prohibited from imposing lifetime or annual limits on the dollar value of health benefits (except for non-essential health benefits), or from rescinding coverage except in the case of fraud. In addition, insurers must notify plan participants of terms regarding designation of plan provider, notify them that they may choose any primary care provider willing to be their healthcare provider, and provide emergency service without prior authorization requirements or higher cost-sharing payments for out-of-network versus in-network providers, if emergency services are provided in plans.
Congress appropriated $5 billion to subsidize care for those Americans who enroll in the interim PCIP program between July 1, 2010 and January 1, 2014. This money will subsidize health care claims and administrative costs that exceed the premiums collected for PCIP. Subscription premiums in these interim PCIP plans are expected to be higher than premiums offered by ‘regular’ insurers, however, they will not exceed the cost of premiums for equivalent coverage on the individual market. Monthly premiums are expected to range from $115 to $1,735, depending on age, smoking status, and state of residence. For example, according to HHS the monthly premium of a non-smoking person age 45-54 would range from $330 in Hawaii to $556 in Florida. Out-of-pocket spending is limited to $5,950 for individuals and $11,900 for families, excluding premiums. The Congressional Budget office (CBO) estimates the new PCIP will prove more attractive than existing high-risk pools for two reasons: first, the premium would be lower (state high-risk pools typically charge a premium between 125 percent and 200 percent of the standard premium), and second, because new pools would provide immediate coverage for enrollees’ preexisting medical conditions whereas current high-risk pools generally do not.
Health insurers can no longer charge more or deny coverage to you or your child because of a pre-existing health condition like asthma, diabetes, or cancer. They cannot limit benefits for that condition either. Once you have insurance, they can’t refuse to cover treatment for your pre-existing condition.