Some insurers stop writing new coverage for kids

[July 24, 2010]  WASHINGTON (AP) -- Some major health insurance companies will no longer issue certain types of policies for children, an unintended consequence of President Barack Obama's health care overhaul law, state officials said Friday.

Florida Insurance Commissioner Kevin McCarty said several big insurers in his state will stop issuing new policies that cover children individually. Oklahoma Insurance Commissioner Kim Holland said a couple of local insurers in her state are doing likewise.

In Florida, Blue Cross and Blue Shield, Aetna, and Golden Rule - a subsidiary of UnitedHealthcare - notified the insurance commissioner that they will stop issuing individual policies for children, said Jack McDermott, a spokesman for McCarty.

The major types of coverage for children - employer plans and government programs - are not be affected by the disruption. But a subset of policies - those that cover children as individuals - may run into problems. Even so, insurers are not canceling children's coverage already issued, but refusing to write new policies.

The administration reacted sharply to the pullback. "We're disappointed that a small number of insurance companies are taking this unwarranted and unnecessary step," said Jessica Santillo, a spokeswoman for the Health and Human Services department.

Starting later this year, the health care overhaul law requires insurers to accept children regardless of medical problems - a major early benefit of the complex legislation. Insurers are worried that parents will wait until kids get sick to sign them up, saddling the companies with unpredictable costs.

Blue Cross and Blue Shield of Florida issues about 9,000 to 10,000 new policies a year that only cover children. Vice president Randy Kammer said the company's experts calculated that guaranteeing coverage for children could raise premiums for other individual policy holders by as much as 20 percent.

"We believe that the majority of people who would buy this policy were going to use it immediately, probably for high cost claims," said Kammer. "Guaranteed issue means you could technically buy it on the way to the hospital."

Kammer said the company did not make the decision lightly. "We were looking at all our other individual policy holders who pay a lot for coverage, and we didn't think it was fair to given them that kind of an increase to benefit a small population that receives a greater advantage than they do," she said.

Industry officials estimate that children's policies account for 8 percent of single coverage plans sold directly to consumers.

To get around the problem, insurance companies and state insurance commissioners are pressing the federal government to require an open enrollment period for the guaranteed children's coverage.

Parents could only get the guaranteed coverage during a designated month each year, or if the family went through a major change, such as a divorce or a parent losing their job. Open enrollment periods are standard for most employer health plans, and some government programs.

"That seems to be a fairly reasonable approach," said Holland, the Oklahoma commissioner, a Democrat. "It would create a mechanism to get children into coverage but limit the ability to misuse the system."

State insurance commissioners who have brought the problem to the attention of the Obama administration say many insurers could stop issuing individual coverage for children. "We are attempting to convince (federal officials) that this is a serious enough concern to work with (insurers) to give them some relief," Holland said.

Final regulations for the new children's coverage are due before Sept. 23. The requirement to cover kids with pre-existing medical problems will apply to new plans starting after that date.

HHS spokewoman Santillo would not say how the administration intends to address the problem. "We are working with the insurance industry to help ensure that quality coverage is available nationwide for children with pre-existing conditions," she said.

[Associated Press; By RICARDO ALONSO-ZALDIVAR]

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