Insurers behaving badly
You may have heard that many health insurers across the country (including several major insurers such as WellPoint, UnitedHealth Group, Aetna, Cigna, and Humana) have been announcing the discontinuation of new child-only policies. These are insurance products sold in the individual market to children under age 19 that comprise approximately 8 percent of all individual policies. This is a relatively small group of children to be sure but it’s also a particularly vulnerable one. Parents who work for employers that do not offer insurance plans with dependent coverage and grandparents enrolled in Medicare who act as the primary caregiver for children often rely on these policies.
So, why are insurers saying that they will stop selling these products?
Insurers are discontinuing the sale of new child-only policies to avoid having to comply with a provision in the Affordable Care Act (ACA) that prohibits new group and individual plans from denying coverage for pre-existing conditions for children under age 19. This provision applies to all new plans except grandfathered individual plans (those in existence prior to September 23, 2010). Insurers claim that they are afraid families will only purchase insurance for their children when they are already sick or have significant health expenses (known to health policy wonks as “adverse selection”).
While the concern about adverse selection is not entirely unreasonable, the decision of insurers to address it by ceasing to sell new child-only policies is unnecessary. There are solutions available to insurers that can help to mitigate the risk of adverse selection, as outlined by Secretary of Health and Human Services (HHS) Kathleen Sebelius in this letter to Karen Ignagni, President and CEO of America’s Health Insurance Plans (AHIP). Measures permitted by HHS include (to the extent allowed under state law): allowing insurers to establish open enrollment periods, allowing insurers to adjust rates based on health status, permitting child-only rates to be different from rates for dependent children, and allowing a surcharge to be assessed for dropping coverage and subsequently reapplying.
However, many of AHIP’s members don’t seem to believe that these measures are adequate. Advocates should contact their state insurance departments to explore what creative policy options can be pursued that will result in the continued sale of new child-only policies. For example, the New Hampshire Insurance Department recently issued a bulletin warning insurers that New Hampshire state insurance law and the ACA taken together “require all health insurance carriers to take an application for any of their individual products from any New Hampshire resident, regardless of that person’s age. For an applicant under age 19, a health carrier must guarantee issue any of its individual products.” In other words, insurers offering coverage in the individual market in New Hampshire must offer child-only policies and can’t deny coverage based on a pre-existing condition to a child who applies for such a policy.
Children in New Hampshire are fortunate that advocates and regulators there are working together to require insurers to continue to offer child-only policies. In some states, policy options may be more limited due differences in state insurance laws but it remains important that advocates and regulators across the country work together to ensure that child-only policies remain as widely available as possible.
—Patrick Tigue, Children’s Health Care Coordinator, New England Alliance for Children’s Health