The Denver Business Journal is reporting that the head of the Colorado Children’s Campaign is “deeply concerned” about the departure of five Colorado health insurance carriers (Aetna, Humana, Cigna, Assurant/Time and United HealthOne) from the individual child-only market. The carriers’ decision is a direct result of a provision in the PPACA that requires all new policies for children to be guaranteed issue starting on September 23, 2010. The carriers that are discontinuing child-only coverage maintain that unless all carriers are required to offer child-only coverage, the ones that do will be at a financial disadvantage because of the additional risk they are assuming by covering children with no medical underwriting.
UPDATE: As of September 17th, 2010, Anthem Blue Cross Blue Shield also announced that they will be discontinuing new child-only policies in Colorado as of September 23, 1010.
A few things should be noted here. The carriers are only discontinuing child-only policies. They will still issue new coverage for children (with no medical underwriting) as long as there is also at least one adult on the policy. In addition, existing policies will not be impacted. The carriers will not be issuing new child-only policies, but policies that are already in force will continue to be in force.
Child-only policies make up a tiny segment of the individual health insurance market (roughly 2% – 5%). We do occasionally get calls from parents who want to purchase health insurance just for their child(ren), but it’s much more common to have at least one adult on the application as well. And when parents do want to purchase health insurance just for their children, they almost always have another option for coverage – usually a group plan sponsored by a parent’s employer. The individual policy may be less expensive, but it’s rarely the only option these families have. Children in lower income families may qualify for Medicaid or CHP+ (children in a family of four qualify for CHP+ coverage if the family income is under $55,128/year). And parents who do not have available group health insurance through an employer (but earn too much money to qualify for CHP+) tend to be looking for individual health insurance for the whole family, rather than for just the children.
Although child-only policies are rare and there is usually another option available for those families, the departure of five of the major carriers will be a disappointment for families who do need child-only coverage for one reason or another. It will limit their options, and chances are the remaining policies in the market will be more expensive because of the added risk that the carriers will be taking. We had hoped that the addition of an option for insurers to set up open enrollment periods for children would convince more of them to stay in the child-only market, although this may still have an impact as time goes by.
I believe that the provision in the PPACA that required all children’s policies to be guaranteed issue six months after the bill was signed was not well thought out. The law requires all policies to be guaranteed issue starting in 2014, but that gives insurers three more years to figure out the details, determine pricing, and set up a system that can cover everyone without medical underwriting and still be profitable. The provision regarding children happened so fast that there was no time for carriers to do significant analysis of costs or figure out premiums. In my talks with the Colorado Division of Insurance and various carriers over the last few months, it appears that both regulators and insurers are still struggling to work out the details of compliance with the new law (not just the children’s coverage issue, but all of the major changes implemented by the PPACA). If insurers had been given more time to work out the details of guaranteed issue coverage for children, maybe they could have come up with a way for most carriers to continue to offer child-only coverage.
Anything involving children tends to tug at our heart strings a bit. It’s a common feeling that children should be able to get health insurance, and their medical history shouldn’t matter. On an emotional level, that makes sense. But on a practical level, the money aspect cannot be discounted. Most health insurance carriers are private, for-profit entities, and they have to make business decisions that make good financial sense. If they could simply start covering all children without regard for medical history, and have it remain a profitable venture, they would do so. There’s a reason five of the major carriers have pulled out of the child-only market. Chances are, that segment would not have continued to make money, and insurers cannot operate at a loss.
Regardless of the practicalities involved, there’s no doubt that the headlines about insurers ceasing to issue child-only policies is generating some ill will and bad PR for insurance carriers. Either lawmakers knew that would happen, or else they put very little thought into considering the details of how insurers would go about making children’s coverage guaranteed issue a mere six months after the bill was signed into law, and just added the provision as a feel-good part of the bill.