HHS Prevents Insurers from Undercutting Key Reform for Children’s Coverage

A provision of the health reform law that took effect last month prohibits insurers from denying coverage to children with pre-existing health conditions.  As a result, for the first time in most states, families with children with serious illnesses, chronic conditions, and special health care needs will be able to purchase coverage for their children in the individual health insurance market.  But some insurance companies are resisting the change — and Health and Human Services (HHS) Secretary Kathleen Sebelius issued a letter today clarifying what insurers can and can’t do under the new rules.

Back when health reform became law, the insurance industry made a public commitment to fully comply with the new requirement.  Now, however, some insurers have announced that they will stop selling so-called “child-only policies” out of concerns that their costs will rise as children who need more health care services enroll, even though the health reform law allows insurers to continue to charge higher premiums for children in poor health.  At the request of insurers, HHS is also permitting insurers to penalize families that drop coverage for their children and then seek to reapply only when they need treatment, as well as to require all children to enroll in coverage only during annual open enrollment periods.

Other insurers offering child-only plans have sought even more concessions from HHS, such as permission to require children with pre-existing conditions — but not healthy children — to enroll only during open enrollment periods and to deny coverage outright to sicker children if they try to enroll outside those periods.  This would effectively enable insurers to bypass health reform (i.e., the Affordable Care Act) and deny coverage just to sick children for most of the year.

Moreover, if HHS approved the insurers’ request, families whose children have pre-existing conditions might not succeed in purchasing coverage even during the open enrollment period.  For example, families that are denied coverage when they apply outside the open enrollment period might get discouraged and not reapply during the open enrollment period.  Insurers might also do little or nothing to make families aware of the open enrollment period (while actively marketing their plans to healthy children throughout the year) or set such a narrow enrollment window that many families could easily miss the deadline for applying.

Fortunately, in today’s letter to the National Association of Insurance Commissioners, Secretary Sebelius made clear that while insurers could continue to require an open enrollment period, it must apply to all children, irrespective of their health status.  That is a reasonable approach.  It permits insurers to take steps like an open enrollment period that can limit the extent to which families enroll their children only when they most need medical treatment.  It also permits insurers to charge families higher premiums if their children are in poor health.  But it doesn’t allow them to continue excluding just sicker children from coverage for most of the year and take advantage of an opportunity to undercut this critical protection.