GAO Provides Updated Information On ERRP And PCIP Spending

The Patient Protection and Affordable Care Act (ACA) created two temporary programs—the Early Retiree Reinsurance Program (ERRP) and the Preexisting Condition Insurance Plan (PCIP)—and appropriated $5 billion to each program. Both programs are operated by the Center for Consumer Information and Insurance Oversight (CCIIO), and are intended to continue through 2013, after which the ACA-created health insurance exchanges will be implemented. The Government Accountability Office (GAO) has released a report that describes the current status of ERRP and PCIP enrollment and spending, as well as program funding through 2013.

ERRP. The ERRP was created to reimburse sponsors of employment-based health plans to help cover the cost of providing health benefits to early retirees—individuals age 55 and older not eligible for Medicare. The CCIIO discontinued enrollment in ERRP in May 2011, and stopped most program reimbursements in September 2012 to keep spending within the $5 billion ERRP appropriation.

When the cap was reached, the GAO noted that significant demand for the program remained with 5,699 ERRP reimbursement requests left outstanding that accounted for about $2.5 billion in unpaid claims. CCIIO officials planned to pay some of the outstanding reimbursement requests by redistributing any overpayments recovered from plan sponsors—when, for example a plan receives a rebate that lowers the total cost of a prior claim—as well as money recovered from program audits. As of January 2013, the CCIIO told the GAO that it had recovered a total of $54 million and redistributed $20.7 million of this amount.

PCIP. The PCIP program is a high-risk pool that provides access to health insurance for individuals unable to acquire affordable coverage due to a preexisting condition. As of March 31, 2013, enrollment in the PCIP had reached 114,959 individuals. By the end of January 2013, total PCIP spending reached about $2.6 billion, representing over half of the $5 billion PCIP appropriation compared to a year earlier when only about 16 percent of the total appropriation had been spent, the GAO found.

According to the CCIIO, PCIP spending is likely to approach the $5 billion appropriation by the end of 2013, and CCIIO is taking steps intended to ensure it does not exceed this amount. CCIIO officials told the GAO they anticipate total PCIP spending to closely approach $5 billion, and that they are taking program management steps—many of which are not yet reflected in spending data—to ensure appropriated funding lasts through 2013.

For example, in the second half of 2012, CCIIO was able to obtain lower provider reimbursement rates for the PCIP program, the GAO noted. Also, in January 2013, CCIIO instituted benefit changes that shifted more costs onto PCIP enrollees, including by increasing enrollee coinsurance from 20 percent to 30 percent in many states. Due to growing concerns about the rate of PCIP spending, in February 2013, CCIIO suspended PCIP enrollment to ensure the appropriated funding would be sufficient to cover claims for current enrollees through the end of the program. Officials told GAO that if spending trends begin to indicate that funding will not be used as quickly as they are projecting, they could reinstate PCIP enrollment to use remaining funds.

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