Friday, October 15, 2010

Insurance companies may charge more for sick kids

Parents who are thinking of looking for child-only health insurance coverage might want to pay especially close attention to insurers’ open enrollment periods, based on a recent news release from the Health and Human Services Department (HHS).

In the wake of health care reform, many insurance companies have dropped or are threatening to drop child-only policies, a move which drew fire from HHS Secretary Kathleen Sebelius on October 13, writing to the National Association of Insurance Commissioners, “Unfortunately, as we discussed, some insurers have decided to stop writing new business in the 'child-only' insurance market – reneging on a previous commitment made in a March letter to 'make pre-existing condition exclusions a thing of the past,'" adding, “… the decision of some health insurance companies to stop selling new polices for children is extremely disappointing.”

This latest move by the insurance industry has forced the Obama Administration to make yet another concession with regard to the PPACA. HHS is now stating that insurers may, until 2014, raise the cost of coverage for sick children, subject to state law, but only outside their open enrollment periods. As of 2014, higher rates based on a child’s health status will be completely prohibited.

What this means for parents of children with pre-existing conditions, is that, until 2014, it is important to sign their children up for insurance during a provider's open enrollment period. Otherwise, they will run the risk of paying substantially higher premiums.

Many insurers apparently expressed worries during a September 22 meeting with Sebelius and President Obama about the financial consequences of “adverse selection,” whereby parents would not insure their healthy children until they become sick, which would drive up insurance rates. Sebelius responded to these concerns by stating in her letter that “. . . we believe that there are options other than abandoning families who seek this coverage, as evidenced in states with similar laws already in place. In response to questions we have received, we have clarified that a range of practices related to “child-only” policies are not prohibited by the Affordable Care Act . . . “.

Those practices include allowing health insurance issuers to determine the number and length of open enrollment periods for children under 19 (as well as those for families and adults), consistent with state law, allowing rates to be adjusted for health status as permitted by state law until 2014, allowing insurance companies to impose a surcharge for dropping coverage and subsequently reapplying for it if permitted by state law, and allowing for the implementation of rules, consistent with state law, to help prevent employers from encouraging workers to enroll children in child-only policies instead of employer-sponsored insurance. It would seem that any real financial fears on the part of insurers would be addressed by these provisions.

The letter also pointed to state Children’s Health Insurance Program (CHIP) coverage and the Pre-Existing Condition Insurance Plan (PCIP) program, the latter having been created by the PPACA. Every state, said Sebelius, “. . . has coverage available to children without regard to pre-existing conditions through their Medicaid and CHIP programs; in most states, these programs are available to families with incomes below $88,000 (twice the poverty level).”

Some health insurers proposed accepting health applicants year-round and restricting the sale of policies to children with pre-existing conditions to an open enrollment period. In her letter, Sebelius characterized this approach as "legally infirm, and inconsistent with the language and intent of the Affordable Care Act," adding that it would be unlawful for states to allow insurance companies to deny coverage of children with pre-existing conditions outside the companies' open enrollment periods. So, the good news is that, if your child has a pre-existing condition, a health insurance provider that sells child-only policies must cover him or her, but the bad news is that, outside the open enrollment period, premium rates will probably be substantially higher.

For more information. For a comprehensive analysis of the Patient Protection and Affordable Care Act, and additional information on health reform and other developments in employee benefits, just click here.

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