Health Insurers Eliminate Child-Only Policies, Is it a Sign of Future Cutbacks?

Sept. 23, 2010— -- The move by some health insurance companies to scrap child-only policies has many questioning whether providers will try to circumvent provisions of the new health care reform law in the future. Politically, it has unearthed old tensions between the Obama administration and health insurances at a time when new provisions are being rolled out.

Concerns about the new law have prompted major insurance providers such as WellPoint, Cigna, CoventryOne, and some Blue Cross and Blue Shield companies to stop offering child-only policies, as the Washington Post first reported.

Health insurers will still be prohibited from denying coverage to children with pre-existing conditions, as the health care law requires, but coverage for children under 19 will now be offered in family plans instead of as a separate policy.

The move itself won't impact a large percentage of the population; a recent survey by America's Health Insurance Plans (AHIP) found that 6 percent of individual policies are child-only plans. But what makes it significant is that it signals how insurance companies will deal with other provisions of the law in the future.

"There's a concern about how insurance companies are going to react to the wide variety of new requirements that they've got," said Ron Pollack, executive director of Families USA, an advocacy group. "They're just going to try and elude those requirements in different ways."

Insurance companies say they were forced to drop child-only plans because of higher costs and to keep themselves competitive.

"The regulations provide a very powerful incentive for parents to wait until their children get sick before buying insurance. That will drive up cost for everybody else," said AHIP spokesman Robert Zirkelbach. "So given the uncertainty that exists in the marketplace for the niche child-only products, health plans are having to make some very difficult decisions."

A Cigna spokeswoman downplayed the impact this would have, saying the company provides coverage to less than 1 percent of the individual and family market, or about 100,000 people in 10 states. Cigna is the fifth largest health insurance company, according to a 2009 Fortune Magazine survey.

"We made a decision to stop offering child-only policies to ensure that we can remain competitive in the 10 markets where we sell individual and family plans," Cigna spokeswoman Gwyn Dilday said in a statement. "We'll continue to evaluate this policy and could reconsider changing this position as market dynamics change."

Administration officials agree that child-only policies represent only a small part of the individual market. Nevertheless, they expressed outrage at the move, saying insurance companies are trying to circumvent the new law.

"I think it's very unfortunate that carriers are reverting back to their old promises after they committed they won't do that," said Steve Larson, director of oversight at the Department of Health and Human Services. "We will work with the industry to make sure we implement this law that works for everyone."