Health Insurance Quotes
Major health insurance companies stop selling child-only policies
Fearing that parents won't buy health insurance coverage for their children until they are sick, many major insurance companies have stopped selling child-only health insurance plans in several states, saying the policies could saddle the companies with enormous expenses.
The action by Anthem Blue Cross, Aetna and other companies came on the eve of new health care reform mandates that kicked in on Sept. 23. The rules prevent health insurance companies from rejecting children under age 19 with pre-existing medical conditions.
The insurance companies said these provisions of the new health care reform law remove any incentive on the part of parents to buy health insurance coverage for their children before any serious, expensive-to-treat illnesses are diagnosed. This deprives insurance companies of income from premiums that might help them cover high medical costs later for children who become seriously ill, and would force insurance companies to raise premiums for their other policyholders.
Insurance companies halting sales of child-only health insurance and states affected by those decisions
Aetna: Alaska, Arizona, Arkansas, California, Colorado, , Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Michigan, Missouri, Mississippi, North Carolina, Nebraska, Nevada, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Virginia, West Virginia, Washington, D.C., and Wyoming
Anthem Blue Cross: California, Colorado, Connecticut, Florida, Georgia, Illinois, Missouri, Nevada
Cigna: Arizona, California, Colorado, Florida, Illinois, Connecticut, Tennessee and Texas
CoventryOne: California, Connecticut, Illinois, Florida and Missouri
Humana: California, Colorado, Connecticut, Florida and Illinois
Regence BlueShield: Oregon, Utah and Washington
UnitedHealth Group: Colorado and Florida
Sources: State departments of insurance and news reports
The decision by such companies as Cigna, Humana, CoventryOne, Aetna, Anthem Blue Cross and UnitedHealth Group affects only certain states and doesn't apply to existing child-only health insurance coverage, family policies or group health insurance coverage provided to children through their parents' employers. (See sidebar.)
Adverse selection strikes fear into insurers’ hearts
Insurance regulators in California, where 1.5 million children don't have health insurance coverage, said the problem stems from the fact that the federal “individual mandate” that requires all citizens to carry health insurance coverage doesn't begin for another four years. Without that requirement -- and the larger risk pool and premium income it brings -- insurers are facing what California Department of Insurance spokesman Ioannis Kazanis calls "the most acute example of adverse selection."
"If insurers have to sell policies to children without underwriting, parents won't try to get coverage until their child is sick, and then the insurer would have to sell to them," Kazanis says. "Thus, the only people who would buy a child-only policy would be the parents of sick children. The mandate to buy insurance … is the antidote to this problem [but] doesn't kick in until 2014."
The requirement that insurance companies accept children with pre-existing conditions is one of the most controversial mandates set out in the new health care reform law passed in the spring of 2010. By 2014, all health insurers will be required to cover all individuals with pre-existing medical conditions.
Kazanis says child-only policies appeal to three groups:
- Families where the parents' employers don't contribute to dependent health insurance
- Parents who can't afford to insure themselves
- Parents who can't buy their own coverage due to health conditions but want to cover their children.
Other provisions of the health care reform law that went into effect along with the child pre-existing condition regulation include:
- Young adults can now stay on their parents' health insurance until they are age 26.
- Lifetime and annual caps on medical benefits are now eliminated.
- Coverage without deductibles or co-payments is now required for some preventive services.
The move by insurance companies to stop selling child-only policies, which they admit is a very small part of their business, drew criticism from health care advocates, state officials and the Obama administration.
Officials in some states were negotiating with insurance companies to try to get them to change their minds. In Colorado, the state’s Division of Insurance set up a mandatory open-enrollment period for child-only policies, effectively removing parents' freedom to wait until their child is sick before getting medical insurance for them.
Meanwhile, insurance regulators in California, noting that their laws don't require companies to sell child-only policies, were turning to the federal government for help.
"We're in regular contact with the federal Department of Health and Human Services, urging them to weigh in on the matter and clarify any confusion that may exist on child-only policies," Kazanis says.
The Obama administration believes that the health insurance industry had signed off on this provision, citing a letter from the insurance industry trade group America's Health Insurance Plans (AHIP). However, a spokesperson for that trade group says it had been referring to allowing children with pre-existing conditions to join their family's health plan.
"Health plans are committed to keeping families' coverage as affordable as possible," says AHIP spokesperson Robert Zirkelbach. "While well-intended, the current regulation provides a powerful incentive for parents to wait to purchase coverage until after their children become sick, which will drive up the cost for those who are currently insured."