The Colorado House of Representatives approved Senate Bill 128 earlier this week, and it’s headed for the Governor’s office to be signed into law. SB128 would require any health insurance carrier that offers policies in Colorado for adults to also offer policies for children, even if there is not an adult listed on the policy with the child.
The issue of child-only policies has been a sticky one in Colorado over the past several months. Starting in September last year, federal law began requiring health insurance carriers to offer policies to children regardless of pre-existing conditions. Carriers can still increase the premiums based on medical underwriting, but no child can be denied coverage entirely if the carrier is accepting application for children at all. As a result, nearly all of the major health insurance carriers in Colorado stopped issuing child-only policies last fall. The language of the law was modified to include open-enrollment periods during which children could apply for coverage, and last September the Colorado Division of Insurance officially designated those open-enrollment periods as January and July each year. The idea was that with open-enrollment periods rather than constant access to new policies, parents would be less likely to wait until a child was sick to seek coverage. But even with the open-enrollment periods, only two carriers – Rocky Mountain Health Plans and Kaiser Permanente – have offered child-only policies in Colorado since last fall.
SB128 utilizes the January and July open enrollment periods, and mandates that all carriers that offer individual policies to adults will have to do so for children too, during those two months each year. There is no doubt that this bill will take some pressure off of Kaiser and RMHP, since those two carriers have been the only option for people looking for individual child-only policies recently. But it remains to be seen whether it will cause any ripple effects in the individual health insurance market in general.
Private health insurance carriers are businesses, and they base their decisions around what makes sense from a business perspective. Since so many carriers exited the child-only market last fall, we can assume that offering guaranteed-issue policies to children (when there’s no requirement that all children have health insurance) is a money-losing proposition. The open-enrollment periods would seem to solve that problem at least to some extent, but none of the major carriers opted to come back into the market after the open-enrollment periods were set up. Legislation requiring them to do so won’t change the financial realities of having to offer guaranteed-issue coverage to a particular population without a corresponding mandate that everyone in that population obtain coverage.
I imagine that some of the carriers that exited the child-only market last fall did so simply because everyone else was doing it too. Remaining in the market as one of only a few carriers still offering child-only policies means that a company would be taking on a larger share of the burden of covering children with pre-existing conditions (RMHP and Kaiser deserve kudos for doing just that). SB128 will solve that problem, as all carriers will be on an even playing field when it comes to individual child-only policies.
As we mentioned last year when this issue was first being raised, child-only policies make up a very small fraction of the individual policies purchased in Colorado. Most children are on an application along with at least one parent, and those policies are still being issued by all of the major carriers in the state, even though the coverage for those children is now guaranteed-issue. SB128 will not have any impact on policies that include coverage for a parent along with the child. And SB128 only requires carriers to offer child-only policies during January and July, or within 30 days of a “qualifying event”. So there is still a strong incentive for parents to sign their children up for health insurance during the first available open-enrollment period rather than waiting until the child is in need of care. Hopefully this will avoid adverse selection enough that all of the major carriers will be able to seamlessly return to offering child-only coverage.