California gets pre-existing condition health plan off the ground

California Gov. Arnold Schwarzenegger has announced the formation of the Pre-Existing Condition Insurance Plan, designed to bridge the gap between now and 2014, when private insurers will no longer be allowed to decline coverage or charge higher premiums to people with pre-existing conditions.

"Today's action is a major achievement in implementing healthcare reform in California," said Schwarzenegger in a Monday press conference unveiling the plan, which is funded entirely federal grant money of $761 million and premiums paid by members. "Operating the high-risk insurance plan is a win-win for our state because we can maximize federal funds while providing more affordable coverage to individuals who desperately need health insurance."

The PCIP will operate alongside the state-funded Major Risk Medical Insurance Plan, with the primary difference being that in order to qualify for PCIP, individuals must not have had any insurance coverage for at least six months prior to their application. State officials anticipate the PCIP will insure roughly 23,000 people at any given time.

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"Now that PCIP has opened its doors, we will be working to make sure that all Californians are aware of this valuable new coverage option," said Kim Belshé, chairwoman of Schwarzenegger's Health Care Reform Implementation Task Force and secretary of the Health and Human Services Agency. "We are dedicated to providing this more affordable option for our hard-to-insure residents."

Neither Kaiser Permanente nor Anthem Blue Cross are participating in the PCIP, though they are participateing in the MRMIP. In late August, when California announced its intention to launch the new pool, both companies opted out, citing the quick timelines to launch and the temporary nature of the program, as well as its poor fit for their existing business models.

"To meet the law's rapid deadlines, the state of California understandably opted to use a financial intermediary (third-party administrator) to make fee-for-service payments to healthcare providers," said Trish Doherty, a spokeswoman for Kaiser. "As a predominantly prepaid healthcare provider, Kaiser Permanente is not organized in a manner that allows us to easily participate in this new program."

Under the Affordable Care Act, states were supposed to have high-risk pools up and running by July 1, though few met that deadline. In California's case the lack of participation by the two major insurers for MRMIP, which covers slightly more than 7,000 people, left the state scrambling to find third-party administrators to handle claims processing and other administrative operations for the plan.

The program has gotten off to a slow start. According to the San Francisco Chronicle, as of late last week, the PCIP had received more than 830 applications for coverage and another 6,420 applications had been sent to eligible individuals.