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U.S. cuts premiums for high-risk health plan

Tue, 31 May 2011 18:46 GMT

Source: reuters // Reuters

* Lower premiums start July 1

* Government to pay brokers, agents for referrals

* Changes to make it easier to sign up for coverage

WASHINGTON, May 31 (Reuters) - Premiums for new federal health insurance plans that cover high-risk people with pre-existing conditions will drop by as much as 40 percent, federal health regulators said on Tuesday.

The insurance plans were created by President Barack Obama's health care overhaul last year as a way to extend coverage to people who have health conditions and were denied policies by private insurers.

Lower premiums, which start July 1, should help boost participation in the plans. Only about 18,000 people have enrolled in the coverage since the program began last year.

Health and Human Services Secretary Kathleen Sebelius also announced changes that will make it easier for people to sign up for the coverage.

"These changes will decrease costs and help insure more Americans," Sebelius said on a conference call.

Premiums will vary by state, but federal officials said the premiums would be more in line with rates charged in each state's individual insurance market.

Starting in July, people can apply for coverage by providing a letter from a doctor stating that they had a medical condition or illness within the previous 12 months.

Previously people had to produce a rejection letter from an insurance company in order to be eligible for the coverage. Other eligibility requirements will still be in effect, including having no health coverage for at least six months.

The government also will begin paying brokers and agents for connecting people with the pre-existing coverage plan, officials said.

The new healthcare law set aside $5 billion to cover people with existing medical conditions until 2014 when new health insurance exchanges are suppose to be up and running. Insurance plans on the exchanges will not be allowed to exclude coverage or charge more for people with pre-existing health conditions.

The federal government is administering the health plans for pre-existing conditions in 23 states and the District of Columbia. Sebelius said letters will go out to the 27 states running their own programs informing them of the opportunity to reduce premiums.

Enough federal money is available to cover the extra costs so states will not have to pick up any of the charges.

Federal officials said six states already have premiums in line with the individual market and in those states, premiums would remain the same.

Enrollment in the pre-existing health conditions program has been well below original estimates. The Congressional Budget Office had estimated that about 200,000 people would participate in the program, other estimates put the expected participation rate much higher.

But premium costs and lack of information about the program has kept enrollment down. Sebelius and other officials said the premium changes and new outreach efforts should help boost enrollment. (Reporting by Donna Smith; Editing Tim Dobbyn)