The U.S. Department of Health and Human Services (HHS) has announced the establishment of a new Pre-Existing Condition Insurance Plan (PCIP) that will offer coverage to uninsured Americans who have been unable to obtain health coverage because of a pre-existing health condition.

The Pre-Existing Condition Insurance Plan, which will be administered either by a state or by the Department of Health and Human Services, will provide a new health coverage option for Americans who have been uninsured for at least six months, have been unable to get health coverage because of a health condition, and are a U.S. citizen or are residing in the United States legally.

The state of California is one of 29 states plus the District of Columbia that have chosen to operate their own plans. The remaining 21 states have elected to have HHS administer the plans.

California will use $761 million in federal funding made available under the Affordable Care Act and building on its experience running its existing state-based “high risk” program called the California Major Risk Medical Insurance Program which provided coverage to 7,036 individuals in 2009.

Created under the Affordable Care Act, the Pre-Existing Condition Insurance Plan is a transitional program until 2014, when insurers will be banned from discriminating against adults with pre-existing conditions, and individuals and small businesses will have access to more affordable private insurance choices through new competitive Exchanges.

In 2014, Members of Congress will also purchase their insurance through Exchanges.

“For too long, California residents with pre-existing conditions have been locked out of our health insurance market,” said HHS Secretary Kathleen Sebelius.

Sebelius said the new insurance plan offers new option, the same insurance coverage as a healthy individual if they’ve been uninsured for at least six months because of a medical condition.

“This program will provide people the help they need as the nation transitions to a more competitive and fair market place in 2014,” she said.

The Affordable Care Act provides $5 billion in federal funding to support Pre-Existing Condition Insurance Plans in every state.

Some states have requested that the U.S. Department of Health and Human Services run their Pre-Existing Condition Insurance Plan. Other states, like California, have requested that they run the program themselves. For more information about how the plan is being administered in California, please visit HHS’s new consumer Web site, www.HealthCare.gov.

“Health coverage for California residents with pre-existing conditions has historically been unobtainable or failed to cover the very conditions for which they need medical care,” said Jay Angoff, director of the Office of Consumer Information and Insurance Oversight (OCIIO) which is overseeing the program. “The Pre-Existing Condition Insurance Plan is designed to address these challenges by offering comprehensive coverage at a reasonable cost. We modeled the program on the highly successful Children’s Health Insurance Program, also known as CHIP, so states would have maximum flexibility to meet the needs of their citizens.”

In order to give states the flexibility to best meet their needs, HHS provided states with the option of running the Pre-Existing Condition Insurance Plan themselves or having HHS run the plan.

Beginning immediately, the national Pre-Existing Condition Insurance Plan will be open to applicants in the 21 states where HHS is operating the program.

In August, eligible Californians will be able to apply for coverage under the state’s new PCIP program. All states which are operating their own Pre-Existing Condition Insurance Plans will begin enrollment by the end of the summer, with many beginning enrollment today.

“The Pre-Existing Condition Insurance Plan is an important next step in the overall implementation of the Affordable Care Act,” said Richard Popper, director of Insurance Programs at OCIIO. “We have been working closely with the states and other stakeholders to make sure this program reaches uninsured Americans struggling to find coverage due to a pre-existing condition.”

The Pre-Existing Condition Insurance Plan will cover a broad range of health benefits, including primary and specialty care, hospital care, and prescription drugs.

The plan does not base eligibility on income and does not charge a higher premium because of a medical condition. Participants will pay a premium that is not more than the standard individual health insurance premium in their state for insurance that covers major medical and prescription drug expenses with some cost-sharing.

Like the popular Children’s Health Insurance Program (CHIP), the Pre-Existing Condition Plan provides states flexibility in how they run their program as long as basic requirements are met. Federal law establishes general eligibility, but state programs can vary on cost, benefits and determination of pre-existing condition.

Funding for states is based on the same allocation formula as CHIP, and it will be reallocated if unspent by the states. Unlike CHIP, there is no state matching requirement and the federal government will cover the entire cost of the Pre-Existing Condition Plan.

While it took more than six months for a small number of states to establish their CHIP programs, HHS officials anticipate that every state will begin enrolling individuals in the Pre-Existing Condition Plan by the end of August.

Information on how to apply for the Pre-Existing Condition Insurance Plan is available at www.HealthCare.gov.

An informational pamphlet on the Pre-Existing Condition Insurance Plan can be found at: http://www.healthcare.gov/center/brochures/PCIP.pdf.

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