First victim of new health care law: child-only policies

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First provisions of the new health care (insurance, really) reform law is going into effect, and, just as I suspected, the first “side effects” are already here. Insurers in Texas decided to stop offering child-only coverage completely, rather than face unlimited liability and “can’t deny coverage due to pre-existing conditions” restrictions.

From business point of view it’s understandable — because there is no mandate at this time, and insurers are forced to issue a policy when someone applies, it’s a money loosing proposition for them. People who only have child-only policy most likely don’t have coverage through employer (it’s almost always cheaper to add a dependent to the group policy, as most employers pay at least portion of the premiums, plus group policies are more lenient for pre-existing conditions) or family coverage bought on a retail market. So, they most likely have low income. And as long, as child remains healthy, why would they want to pay for the coverage?
Once child gets sick, they buy a policy, and keep it for as long as treatment is necessary.

So, most insurers (including United Healthcare, Aetna Inc. and Cigna Inc) decided to cut the losses and simply stop offering new policies. Current policies will expire once they come up for renewal (within a year). More than 250 thousand children will have to go to high-risk pool. Ta-da, and a new expense for the state just grown considerably.

Blue Cross Blue Shield says there will be a new policy “once it is approved”, but that probably means a very hefty increase in premiums. Of course in California, for example, Blue Cross Blue Shield ended one-year insurance premium rate guarantee “in light of forthcoming changes due to health care law”. In other words, they can ask state regulators for increase every month. And question is, how long can the regulators say “No”.

Of course the regular family plans will go up too. Because those additional dependents “up to 25 year old” will be listed as potential liability when insurance companies will ask regulators to approve new rates. And they probably will be approved.

I still stand by my previous posts, that in order to solve the health cost problem insurance should not be needed. And in 2014 we’ll see if it’d be better to switch to German model for insurance mandate, where end user still has a choice (somewhat) but reverse-selection of who applies for extra expensive policies is removed.

p.s. Insurers did warn about stopping writing new policies for children only as early as July (see this article) and were asking to limit enrollment to enrollment period, similar to how insurance is purchased and renewed for group/business plans. But, of course, nothing has been done about it.

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