Special insurance program for the sick suspends enrollment

WASHINGTON (Reuters) - The Obama administration on Friday said it would stop enrolling new beneficiaries in a special $5 billion insurance program for people with pre-existing medical conditions, because of rising costs and limited funding.

The news comes a day after a top U.S. healthcare official told lawmakers on Capitol Hill that the administration is grappling with financial difficulties but determined to keep the Pre-Existing Condition Insurance Plan (PCIP) operating in 23 states and the District of Columbia through 2013.

PCIP was established in 2010 under President Barack Obama's healthcare reform law to provide coverage for sick people unable to find it in the private insurance market. The program is designed as a bridge to January 1, 2014, when legal restrictions barring discrimination over medical conditions come into force.

The U.S. Department of Health and Human Services issued a notice on Friday saying it would suspend new enrollments beginning on Saturday to "help ensure that funds are available through 2013 to continuously cover people currently enrolled in PCIP."

"The program has a limited amount of funding from Congress," the notice added.

About 100,000 current PCIP beneficiaries are not affected by the change, which follows more than two years of escalating enrollments and outlays. Twenty-seven state-run PCIPs will suspend new enrollments after March 2, HHS said.

The news underscores the financial costs involved in covering people with pre-existing conditions, including many with costly chronic diseases, as the $2.8 trillion U.S. healthcare industry prepares for sweeping reforms that analysts say could bring higher health insurance costs.

Gary Cohen, the HHS official responsible for overseeing implementation of Obama's healthcare reforms, including PCIP, told the Senate Finance Committee on Thursday that the administration had begun to alter program benefits while grappling with funding restrictions.

"Running out of money before the end of the year is something we're trying to avoid," he said.

Obama's Patient Protection and Affordable Care Act allocated $5 billion to the program for claims and administrative expenses that exceed premiums collected from enrollees.

An annual report, released on January 31 by the U.S. Centers for Medicare and Medicaid Services (CMS), showed that monthly expenditures peaked last June at nearly $180 million and have since fallen back a level closer to $150 million.

The average cost for an enrollee in 2012 was $32,108 per enrollee and varied widely from state to state, from a low of $4,276 to a high of $171,909, according to CMS, which is an agency within HHS.

Costs also varied widely between enrollees, with 4.4 percent of PCIP beneficiaries accounting for more than half of claims paid in 2012.

(Reporting by David Morgan; Editing by Tim Dobbyn)