HHS Scrambles to Stop Insurers From Dropping Their ‘Child-Only’ Policies

October 14, 2010 - 10:37 AM

(CNSNews.com) – “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,” Health and Human Services Secretary Kathleen Sebelius said on Wednesday (emphasis added).

In an Oct. 13 letter to the National Association of Insurance Commissioners (NAIC), Sebelius complained that some insurance companies have decided to stop writing new policies in the “child-only” insurance market.

The new health care law makes it illegal for insurance companies to deny coverage to children with pre-existing medical conditions, so rather than deny such expensive coverage, a number of insurance companies have said they will drop it altogether.

“We have been trying to work with the insurance industry to resolve this situation,” Sebelius wrote in her letter to NAIC.

Some insurers have said they would sell new child-only policies if they can accept healthy applicants year-round, while limiting open-enrollment periods for children with pre-existing conditions. The Obama administration has rejected that proposal, however.

(The insurance industry warns that if individual market applicants are allowed to wait until they’re sick to purchase coverage, premiums will skyrocket for those who are currently insured.)

“We will continue to reach out to insurers in our effort to encourage them to sell new ‘child-only’ policies between now and 2014 – when the new health insurance exchanges will begin to offer affordable options to children and families, banning all discrimination against all Americans based on health status,” Sebelius wrote.

In her letter to NAIC, Sebelius outlined several steps that insurance companies and states can take “to help preserve coverage options for children” rather than “abandoning” children.

For example, Sebelius said states or insurance companies themselves may set up open enrollment periods when parents can purchase coverage for children under 19 – both healthy children and sick children, that is. Insurers can’t offer coverage to one group at times when they exclude the other.

Sebelius also encouraged states to seek “appropriate legislation to preserve options” for children with pre-existing conditions. California, she noted, recently required individual-market issuers that offer family coverage to also offer child-only policies.

The Obama administration also says insurers may adjust (raise) health insurance premiums, depending on a child’s health status, as permitted by state law.

And it says insurers may impose a surcharge on those who drop coverage and then reapply for it-- if permitted by state law.

The administration also recommends new rules that would prevent employers from encouraging workers to enroll their children in child-only policies instead of employer-sponsored insurance.

“I encourage all states to take whatever actions they can, whether issuing bulletins under existing law to establish uniform open enrollment periods or seeking appropriate legislation, to preserve options for children to obtain coverage regardless of their health status,” Sebelius wrote.