December 30, 2010

Maryland bucks nationwide trend on child-only insurance policies

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By Barbara Pash
Barbara@MarylandReporter.com

Successful negotiation helped Maryland keep two health insurance companies — CareFirst BlueCross BlueShield and Kaiser Permanente of the Mid-Atlantic — writing policies that cover children, though most of their counterparts nationwide have stopped.

Many of the nation’s insurers dropped child-only plans in September, when a provision of the new federal health care reform law took effect that bars them from rejecting children with preexisting medical conditions. Many states, including Maryland, do not have laws requiring the option of child-only policies.

U.S. Health and Human Services Secretary Kathleen Sebelius acknowledged the trend in a scathing letter last October to the National Association of Insurance Commissioners. Sebelius accused the companies of “reneging on a previous commitment” to continue offering such polices and called their decision “extremely disappointing.”

In her letter, Sebelius also praised some states – including Maryland — for taking action on the matter. But she acknowledged that there is nothing the federal government can do.

“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,” Sebelius wrote.

Companies in other states drop coverage

Insurance companies in California, Florida, Illinois, Connecticut, Pennsylvania, Arizona, Tennessee, Texas and South Carolina, among others, have reportedly stopped writing child-only policies.

In California, the insurers and the governor appear to be headed for a showdown. According to news reports, after the insurance companies left the child-only market, Gov. Arnold Schwarzenegger signed a law that prohibits insurance companies from offering polices in the individual market for five years if they fail to offer child-only policies.

The same thing happened in Maryland, but without the drama.

“None of the carriers pulled out of the individual market, but all stopped writing child-only policies,” said Beth Sammis, Maryland’s Acting Insurance Commissioner.

“Currently, there is no mandate that companies offer child-only coverage,” said Sammis, echoing Sebelius.

Sammis negotiated with four insurance companies — “the main companies in the individual market in the state,” she said. CareFirst and Kaiser Permanente agreed to write new policies.

The companies were concerned that under the new provision, “parents would come in and out of the market just when the children are sick. They said, ‘We can’t take the risk.’” To minimize the risk, the Insurance Commission created two open enrollment periods: one in January and one in July. They will run until the health insurance reform law is fully implemented in 2014.

“They require families to plan ahead,” said Sammis, who needed emergency regulations in order to institute the first enrollment period on Jan. 1 and will seek regulatory approval from the 2011 General Assembly for the July enrollment period.

As for premiums, Sammis pointed out that there is nothing in the provision to prevent companies from asking for premiums high enough to compensate for the perceived adverse risk.

“Each of the [two] companies will offer its own policy. The companies will set the premiums, with our approval. They will be required to disclose the cap on children with preexisting conditions, based on their own estimates,” she said.

Few children affected

In Maryland, the number of children who will be affected is unknown, but considered to be quite small. Of the 170,000 Marylanders who have health insurance through the individual market, less than 2% are in child-only policies, Sammis said. The individual market’s main consumers are singles, children and people who do not have employer-sponsored options.

Michael Sullivan, a spokesman for CareFirst BlueCross BlueShield, said in an e-mail that providing access to child-only coverage is in keeping with the company’s mission to make health care coverage affordable and accessible.

“CareFirst has made no secret of its support for the goals of federal health care reform. That commitment can be measured by the approach that we are taking, and the progress we are making in implementing those reforms.”

Sullivan pledged that CareFirst will be an active partner, and work with regulators and lawmakers to expand access to care and ensure coverage sustainability.

He also did not speculate or offer rate quotes, saying that premiums will vary by the subscriber.

Maryland is not the only state to initiate an open enrollment period for child-only policies. Colorado, Ohio, Oregon and the state of Washington have done the same, according to Sebelius, who also noted that some states have passed legislation requiring them.

Sammis was optimistic that more states will join Maryland to make policies available in the future.

“A variety of strategies are being used,” Sammis said. “At the end of the day, most states will have child-only policies offered.”