Opinion- an early indication that Health Care Reform is underfunded

“The Obama administration is terminating new enrollment and cutting benefits for existing enrollees in the Pre-existing Condition Insurance Plan (PCIP), a government program that provides health insurance for people with serious health problems.” (Tony Ondrusek, 2/25/13, IFAwebnews)  The plan was this was the place you went if you were sick until 1/1/14, when there would be all new options.

The PCIP program is the Pre-Existing Conditions Insurance Pool, and it came about with the initiation of Health Care Reform.  The concept- that folks with pre-existing conditions that prevented them from getting coverage would have someplace to go – was a great idea, gone horribly  awry.

I was never able to get one person on the program, and the reason is simple – it was (rightfully) expensive, and had a requirement that you have been without insurance for 6 months.  So you got laid off, your plant closed, and you have a medical problem?  Ok, now just wait 6 months and then we will “help” you with this expensive plan!  Small wonder that enrollment was much lower than forecast by the Administration.  But it turns out that low enrollment was a good thing, as I forecast when it started – this had nowhere enough funding.

Why are they suspending the program 10 months early? How about this quote from HHS-  “Based on program experience and trends since the start of the program, PCIP enrollees have serious and expensive illnesses with significant and immediate health care needs…This suspension will help ensure that funds are available through 2013 to continuously cover people currently enrolled in PCIP.”  Apparently the government just figured out what was obvious to everyone in the industry from the outset – the people who joined were going to be really sick, the claims were going to be high, and they didn’t have enough money!

The funding in the Health Care Reform bill scares me.  Despite premium taxes, fees and charges totalling about 7.6% of premiums (showing up on a bill in your mailbox next year) there are basic math issues:

1)  Individual Mandate – Picture yourself telling a 26 year old just out of college, living at home with parents and barely getting buy in a $25,000 a year job, the following:  You have the choice of paying $2375 for health insurance, or the government will tax you an additional $95.  Does anyone think they are choosing to pay the premium?  Without all the young healthy members contributing money to the pool, there won’t be enough to fund the car for us gray-hairs.

2)  Subsidy – this again is basic Math.  The law essentially incents small employers to not offer health insurance and let their employees go to the exchange.  According to the Census bureau probably about 30 million americans work in companies below 50 employees.  Assuming the average premium is $400, the average employee (earning $35000) at about $277 a month, that leaves a shortfall of $123 per month.  Multiply that by $30 million employees and thats a shortfall of $44,280,000,000.  Thats potentially alot of zeros.

Wheres the money coming from to pay for all this?


–  Reeve