Obamacare’s first unintended victims- child-only policies
Only a few months into America’s new Obamacare era, most child-only policies were dropped by private insurance carriers due to the poorly written legislation that would allow parents to sign up their kids after they were sick or injured and leave the carriers bearing all the costs.
The child-only coverage is just the latest problem to arise from the massive 2,500 page health care overhaul legislation. Earlier this month large corporations, like McDonalds, requested special exemptions from the Patient Protection and Affordable Care Act in order to preserve plans they have in place for part-time employees.
This left the White House scrambling to cover children as promised by law, and allowed the insurance carriers to raise premiums for child-only policies in order to offset expenditures.
Insurance companies as well as brokers only discovered the last minute purchase option the government included in the bill once Obama signed the bill into law. This provision would have placed a significant burden on revenue and force companies to ration benefits to in order to stay in business.
As a result, insurance companies established an open-enrollment period where companies will accept all children, regardless of health, for a one month time period, once the enrollment period ends parents can purchase insurance coverage for their children, but the policy could be tripled.
Once the administration reviewed the paperwork they gave health insurance carriers the green light to raise the rates more expensive child-only policies.
“They can adjust their rates based on health status until 2014, to the extent state law allows,” according to Jay Angoff, director of Office of Consumer Information and Insurance Oversight at the Department of Health and Human Services.
Once attorneys and under-writers waded through the legalese memos were sent out to insurance brokers about the new changes.
“We have reviewed the rules regarding the provisions of the Patient Protection and Affordability Care Act (PPACA) limiting the application of pre-existing condition exclusions for children under 19. Unfortunately, there remains a great deal of uncertainty as to how the rules will be implemented and what the impacts might be on participating insurers. Unfortunately, this has created an unlevel competitive environment. As a result, Anthem Blue Cross has decided to suspend the sale of child-only policies indefinitely, beginning September 17, 2010,” a memo read. “We will continue to monitor the situation and provide additional details on any changes to our process and policies as they become available.”
In the meantime it is the health insurance brokers who are left to sift through the changes, added paperwork and disgruntled customers. “Most of my existing clients are just upset that we’re all paying more now and they were quite happy with the insurance coverage they had,” says one broker.
Other large providers like, Cigna, quickly followed suit and let providers know the child-only plans would now longer be available without purchasing a family plan including parents.
While other companies like Aetna have decided to cancel all their child-only plans and will no longer accept any applications. The company plans to notify policy holders of other options for coverage, but acknowledged the cost would be substantially higher.
“Effective immediately, any applications received requesting a child-only policy with a 12/15/10 effective date (or later) will be closed. Underwriting will notify applicants by mail of their ineligibility, but also provide options for coverage,” another memo stated. “This change positions Aetna for the future so we can effectively handle upcoming changes resulting from healthcare reform. New federal rules require guaranteed issue (GI) of coverage for individuals under the age of 19 and no corresponding coverage requirement. These conditions have the potential to significantly increase the cost of premiums and make coverage unaffordable.”
These glaring changes prompted Health and Human Services Secretary Kathleen Sibelius to clarify the HHS regulation that implements key early provisions of the Affordable Care Act, signed into law on March 23, 2010 to prevent insurers from denying coverage to children based on a pre-existing condition. This HHS clarification outlines different options for insurers and states that offer child-only policies, however it rejects the insurers’ idea of denying coverage to sick children outside the open-enrollment period.
“The Affordable Care Act was designed to ensure that Americans who need health insurance are no longer denied access to the care they need – and that includes the youngest and most vulnerable Americans,” said Sebelius. “We have been working closely with the states in their role as insurance regulators and with insurance companies to find ways to improve access to coverage for America’s families.”
Some states are taking preemptive action in an effort to guide insurance companies through the perils of government-controlled health insurance.
“Working with Maryland’s General Assembly, we will establish by regulation an open enrollment period to be sure Maryland families have more options in purchasing insurance for their children, and I commend Kaiser Permanente of the Mid-Atlantic and CareFirst BlueCross BlueShield for their decision to continue to offer this coverage once the regulations are enacted,” said Maryland Insurance Commissioner Beth Sammis. “We are committed to working to ensure children can get the health care they need, and are glad we have been able to find a solution where these insurers will sell new policies.”
According to Sebelius, it was unfortunate that some insurers decided to stop writing new business in the “child-only” insurance market. The HHS Secretary said insurance companies were “reneging on a previous commitment made in a March letter to ‘make pre-existing condition exclusions a thing of the past.’”
Meanwhile the child-only market is considered a small market and children currently insured by these policies should not be affected. Nevertheless the decision for some health insurance companies to discontinue new polices for children was disappointing to the government.
“Nothing in the Affordable Care Act, or any other existing federal law, allows us to require insurance companies to offer a particular type of policy at this time,” a letter from Sebelius said.
“We have been trying to work with the insurance industry to resolve this situation. Some insurers have said they would sell new child-only policies if they could accept year-round those applicants who are healthy, while restricting access for children with pre-existing conditions to a time-limited open enrollment period,” Sebelius claims. “We have carefully considered these insurers’ legal and policy arguments, and have concluded that the approach they advocate is legally infirm, and inconsistent with the language and intent of the Affordable Care Act. Nor would it be lawful for a state to allow denials of coverage for children based on pre-existing conditions outside of an open enrollment period.”
Keeping tabs on a growing government that is mandating new rules for insurance carriers has sent most to question the effectiveness of health care moving forward. Not only is the country in the middle of a stubborn recession many employees are stuck working overtime to ensure a smooth transition.
Another unintended consequence of Obamacare comes in the mailbox as families begin to open their health-care statements they are finding health insurance premiums are going up, not down as President Obama promised.