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Insurance Companies Struggle to Keep Sick Kids Profitable

Feds Urge States: Push Insurers to Offer Child-Only Health Policies

by Linda Shrieves

In what appears to be an early skirmish in implementing the health-care overhaul, federal officials Wednesday urged states to push insurance companies to sell health policies for children - about a month after many insurers stopped selling child-only policies.

In what appears to be an early skirmish in implementing the health-care overhaul, federal officials Wednesday urged states to push insurance companies to sell health policies for children - about a month after many insurers stopped selling child-only policies.(Creative Commons/Flickr user: Joanna8555) Saying the insurers had "reneged on a previous commitment," Kathleen Sebelius, secretary of Health and Human Services, sent a letter to the National Association of Insurance Commissioners outlining ways the federal government and some states are trying to encourage insurers to again offer child-only policies. Such policies currently are unavailable in Florida.

"Although this is a small market and children currently insured by such policies will not be affected, the decision of some health-insurance companies to stop selling new policies for children is extremely disappointing," Sebelius wrote. "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."

Federal officials and insurance executives have been at odds on the child-only policies for months. In March, in a series of letters between federal officials and insurance officials, Sebelius contended that insurers promised "to make pre-existing condition exclusion a thing of the past." But this summer, when HHS began issuing rules and regulations, insurers balked at the details.

Now federal officials are hoping states will apply pressure too. In California, Gov. Arnold Schwarzenegger recently signed legislation that will bar insurance companies from selling any individual policies in the state for five years if they refuse to sell child-only policies.

Some states, including Colorado, Oregon and Washington, have established uniform open-enrollment periods - setting aside certain times of the year when the child-only policies can be sold. The idea, they say, is to prevent families from signing up for coverage only when their children get very ill and their costs suddenly skyrocket.

By creating uniform enrollment periods, federal officials say that no insurance company receives a disproportionate share of children with pre-existing conditions, because all insurers must accept the children during the same period.

But insurance-industry officials say that doesn't work.

"In Florida, we have a real, live example of what happens when you do that," said Randy Kammer, a vice president for Blue Cross Blue Shield of Florida. People who are self-employed can buy what are known as "one person group policies" - but they're only sold during August each year, she said.

"What happens is: The ill people who really need coverage wait until August to buy the policy. And the healthy people don't," Kammer said. To make up the money they lose on the one-group policies, insurers spread the cost over everyone else who has small-group insurance. "Because of a loss in that segment, everybody gets hit" - and the high cost of coverage discourages healthy people from buying policies, she said.

What insurers want, says Kammer, is to open up enrollment to all children during a limited time frame and then include healthy kids (based on medical exams and questionnaires) for the rest of the year.

"Let's say the government wanted to have open enrollment twice a year. If, for the other 10 months of the year, we could bring in healthy kids, we could do that," Kammer said.

But in her letter to insurance commissioners, Sebelius said excluding sick kids for 10 months of the year - while offering coverage to healthy kids year-round - is "inconsistent with the language and intent of the Affordable Care Act."

Parents of sick children can still buy insurance through public, government-run programs. Florida's KidCare program - the state's health-insurance program for children - sells individual insurance policies for children with pre-existing conditions. And the new federal Pre-Existing Condition Insurance Plans (PCIP) are available to children with pre-existing conditions who have been uninsured for at least six months.

For now, the insurance industry remains reluctant to jump back into the child-only market. A spokesman for the nation's major health insurers, Robert Zirkelbach, maintains that HHS officials are misinterpreting the law. He says that, until 2014, insurers can still refuse new coverage to children because of a pre-existing condition. However, if a child already has coverage or has been accepted for coverage, the insurer cannot exclude payment for treating a particular illness or pre-existing condition.

Yet Maryland officials managed to work out a deal with two insurers - Kaiser Permanente of the Mid-Atlantic and CareFirst BlueCross BlueShield - that have agreed to continue selling child-only insurance policies in that state.

Still, some major insurers remain on the sidelines - and say they'll stay there until HHS changes its position.

"We will no longer offer new child-only policies to help keep costs affordable for those covered by our individual and family plans - plans not offered by an employer," said Cigna spokeswoman Gwyn Dilday. "Existing child-only policies remain in effect. We'll continue to evaluate this policy and could reconsider changing this position as market dynamics change."

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