In a last-minute turnabout, Gov. M. Jodi Rell is considering jettisoning Connecticut’s plan to set up its own new health insurance program for people with serious health problems and instead letting the federal government run the program.

On the day the program was supposed to begin taking applications, Rell instead told top state officials to defer signing a contract with the federal Department of Health and Human Services that would have allowed Connecticut to set up a federally-funded, state-run high-risk insurance pool.

In her letter to Department of Social Services Commissioner Michael P. Starkowski and others, Rell outlined concerns that the premiums set for the program may be “beyond the reach” of Connecticut residents with pre-existing conditions, the target population for these new insurance pools.

Rell’s missive, dated July 1, asks Starkowski, state Insurance Commissioner Thomas Sullivan, and Cristine Vogel, deputy commissioner of the state Department of Health, to “assess the affordability” of the premium rates calculated by the state’s actuarial consultants. Those premiums range from $436 a month for adults under 30 to almost $1,500 per month for those over 65, Rell’s letter states.

“As you conduct this review, you should also take into consideration the federal offer to establish a high risk pool program for states that choose not to operate a state-administered program,” Rell wrote. “Specifically, the question is whether the rate structure in a federally-operated program would be more attractive and affordable to Connecticut residents with pre-existing conditions.”

It’s not clear what effect Rell’s reconsideration will have on people who might benefit from the program. Although applications were to have been accepted starting July 1, coverage would not begin until Aug. 1. So if the issue gets resolved quickly, the impact could be minimal.

The new Pre-Existing Condition Insurance Plan is part of the federal health care reform overhaul. It is designed to provide health insurance for people who have pre-existing health conditions and who have been without insurance for at least six months. Congress established a $5 billion pot of money to create the new high-risk insurance pools and gave states the option of running their own program or having the federal government run it for them.

Connecticut initially indicated that it would set up its own pool, as 28 other states and the District of Columbia are doing.  Connecticut officials crafted a lengthy application and submitted it to HHS on June 2. That application included budget estimates and details of how the plan would work. The state said, for example, that its high-risk pool would be managed by DSS and the Health Reinsurance Association, an existing state-run high-risk pool, and that United Healthcare would be the insurance carrier.

State officials anticipated signing a contract with HHS on June 30 to get the program started. HHS officials did too. On Wednesday, the federal agency announced Connecticut’s plans in a news release, saying the state would get $50 million in federal funding for the program. “On July 1st, eligible Connecticuters will be able to apply for coverage under the state’s new PCIP,” the HHS release stated.

A spokesman for the governor referred questions to DSS. David Dearborn, a DSS spokesman, said on Wednesday that HHS’ news release was “premature” and that the premium rates calculated by the states actuary consultants had given the governor and others pause. And Rell’s letter signals she’s having second thoughts about a state-run program.

“One of the options still open to Connecticut is to go for a federally-operated high-risk pool program, depending on the rate review,” Dearborn said in an email when asked for clarification of Rell’s letter. “The Governor wants the best and most affordable program possible to complement the state-funded program we already have for adults with pre-existing conditions.”

Vogel, who is also chair of Rell’s health reform committee, said the state is just now realizing the costs of creating a state-run high risk pool after getting more specific details from the HHS earlier this week. Rell’s letter states that the actuaries sent the proposed premium rates to the state on June 28, just two days before the state and HHS expected to seal a deal.

“We are continuing to work with HHS, and as we are finding out, some of the technicalities of the plan make it more expensive than we expected,” Vogel said. “It’s the federal requirements that’s making it expensive.”

A spokesman for HHS, Keith Maley, declined to provide an update on the situation, offering only this statement: “We are working closely with states to ensure that we can provide affordable care for people with pre-existing conditions. Connecticut has worked hard to ensure the benefits of the Affordable Care Act help their citizens, and we look forward to working together on the Pre-Existing Condition Insurance Plan.”

Maley did not respond to queries about whether the state could change course this late in the program’s roll-out or how much the premiums would be if the federal government ran the program. But yesterday, in a conference call with reporters, HHS official Richard Popper said premiums would vary from one state to another, from as low as $140 a month to as high as $900 a month.

News reports indicate that other states are also experiencing bumps in launching these high-risk pools. For example, Oklahoma officials were still negotiating their contract with HHS on the eve of the program’s debut, and that state’s insurance commissioner said HHS’s fast timeline was proving a burden.

In addition to Thursday’s HHS rollout of the high-risk pools, the federal agency also launched a new website yesterday where consumers can get more information about the health reform law, including the new high-risk pools.

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