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."

Will Health Insurance Firms Try to Circumvent New Law?

The tensions between the administration and health insurance companies reached a boiling point at the height of the health care debate. Even though both sides are dependent on each other to implement the new law, the recent debate over child-only policies signals that tensions don't seem to have abated six months after the law was signed.

White House Press Secretary Robert Gibbs on Tuesday called the insurance companies' decision on child-only, "unfortunate," and directly criticized AHIP.

"The insurance protection lobby, AHIP, had previously stated their willingness to abide by the law and not make the decision that we see several of these insurers made," Gibbs said. "Obviously, we're very disappointed at the decision they've made."

When asked to respond to Gibbs' comment labeling AHIP as an "insurance protection lobby," spokesman Zirkelbach said the industry is focused on new reforms, but he wouldn't touch on the press secretary's comments.

"The regulations have the potential to significantly increase the cost of coverage at a time when families are already struggling to maintain their health benefits," he said.

"Our industry is focued entirely on implementing new reforms in a way that's going to minimize disruption," Zirkelbach added. "There is a great amount of work to be done to implement all of the changes that need to be made. That's what our industry is focused on."

The tensions between the two sides are unlikely to abate anytime soon, experts say. In fact, more disagreements are expected to surface as bigger provisions roll out.

"You've seen some tensions already about insurance companies raising premiums and now there being some accountability about proposed increases in premiums," Pollack said. "Given that there are very significant practices being changed with the intention of protecting consumers, this (the debate over child-only plans) appears to be a symbol."

Insurance companies have already expressed concern about premiums for the Medicare Advantage program, aprivate sector alternative to the federal government's fee-for-service Medicare program.

Insurance companies are already saying that because of higher enrollment and cutbacks in payments, they will likely have to either increase premiums, reduce benefits or drop out of certain markets altogether.

Beginning today, insurance plans will be required to eliminate lifetime limits on insurance coverage, offer coverage for children with pre-existing condition, remove lifetime caps on coverage, provide free preventive care and allow young adults up to the age of 26 to remain on their parents' health plans, among other changes. Americans will see the changes when their insurance plans renew.

Insurance Resources:

The U.S. Government has created a comprehensive website, www.healthcare.gov, where users can access information about their specific care options.

Consumer Reports magazine has also produced a number of resources explaining the changes to health insurance under the new law.

Click here for Consumer Reports' guide on the basics.

Consumer Reports has also posted more in-depth information here: www.consumerreports.org/health/insurance/health-insurance.htm