By Katie Kerwin McCrimmon
Major national health insurance carriers that have dropped child-only health plans in Colorado and throughout the country may be forced back into the children’s market if they wish to continue selling lucrative individual health insurance policies in Colorado.
Children’s advocates, industry representatives and state officials have been meeting with lawmakers to draft a new law that likely will move forward in the coming weeks in the Colorado legislature. The measure has not been introduced yet. Sen. Linda Newell, D-Littleton, will be sponsoring the measure in the Senate while Rep. Beth McCann, D-Denver and Rep. Ken Summers, R-Lakewood, chairman of the House Health and Environment Committee, will co-sponsor the bill in the House.
The Colorado bill may be similar to a California law that took effect on Jan. 1 of this year and brought the national carriers back to their child-only insurance market, albeit “kicking and screaming,” according to California consumer advocates.
The California law bars insurance companies that refuse to sell child-only plans from selling policies in the larger individual insurance market for five years. Giving up that market would cut insurance industry profits dramatically. In California, the individual market for individuals and small groups generated $17 billion in revenue in 2009, according to the Los Angeles Times.
Colorado consumers in both the individual and group health insurance markets paid nearly $10 billion in premiums in 2009 for their coverage, according to the Colorado Division of Insurance.
Colorado law already states that insurers who choose to withdraw from a particular segment of the insurance market – such as large-group insurance, small-group insurance or individual plans – are barred from that market for five years. Because the child-only market is only one component of Colorado’s individual market, the insurance companies could come back into that market. Colorado currently has no requirement that insurers here must offer child-only plans.
Insurers halted child-only plans last fall
In September, the first of the health law’s new measures went into effect, including regulations prohibiting insurance companies from denying coverage to children with pre-existing conditions. At that time, several of the major national for-profit insurance companies abruptly dropped child-only policies in Colorado and in most states across the country.
According to the Denver Business Journal, those who halted sales of child-only plans in Colorado were: Anthem Blue Cross and Blue Shield of Colorado, Humana Insurance Co., Aetna Life Insurance Co., Cigna Corp., United HealthCare of Colorado and Assurant Health, which is sold in Colorado through Time Insurance Co.
Colorado’s former insurance commissioner passed emergency regulations in September creating limited open enrollment periods to help allay industry fears that parents would wait until children were sick to enroll them in the plans, then pull them out when they no longer needed care. Those emergency measures since have been codified in permanent regulations that went into effect on Jan. 1. But the national carriers still have not returned to the child-only market.
Rep. McCann said she was really angry when the big companies pulled out.
“I felt the insurance companies were not acting responsibly. These kinds of policies are critically important,’’ she said.
McCann and Sen. Newell started working on a bill with a coalition of children’s advocates and found a surprising level of cooperation with insurance industry representatives. There is now bipartisan sponsorship in the House with Rep. Summer serving a co-sponsor.
Insurance companies want to offer plans, spread risk
While outsiders might think that insurance companies would make more money if they had less competition, industry representatives actually want a requirement that all companies must offer the child-only plans if they wish to sell other types of individual insurance.
“Requiring all the carriers to sell this sort of plan creates a level playing field,’’ said Ben Price, executive director of the Colorado Association of Health Plans. “This is one of those unusual situations where we’re asking for more competition. If everyone else is in the market, the risk is spread across the entire market. Each company can afford to take on more risk.”
The insurance companies also view limited enrollment periods as crucial for sick children so parents don’t wait to sign them up until they need care. Conversely, industry officials want to find a way to allow healthy children to sign up year-round so they can have a larger pool and further divide the risk.
“We don’t want to drive up premiums,” Price said. “Cost is all important in this industry.”
Still, Price said the insurance companies are eager to get back into the market and to serve potential clients, especially parents who desperately need health insurance for their children.
“It’s not a huge number of people compared to the total,” Price said. “But it’s huge for those people who need it.”
Colorado had an estimated 131,581 uninsured children in 2009, according to the Colorado Health Institute’s analysis of the most recent census data. The Health Institute estimates that 27,140 children received health coverage through child-only plans in 2008 and 2009 when the Institute conducted the Colorado Household Survey.
Demand for child-only plans rising as family costs soar
Child-only health plans comprise a relatively small part of the entire insurance market because most children with insurance are on their parents’ plans or they receive care under public programs like Medicaid and CHP+.
Under Colorado’s new child-only regulation, families with children needing care can buy insurance during open enrollment periods this month and in July. But the only two carriers who can help them with those products are Kaiser, which does not have statewide programs, and Grand Junction-based Rocky Mountain, which does operate throughout Colorado.
Demand for the plans seems to be on the rise, both because children with pre-existing conditions can now get coverage and because family plans are getting more and more expensive, said Neil Waldron, chief marketing officer for Rocky Mountain Health Plans.
He said demand for child-only plans has doubled since October of 2010, when Rocky Mountain started tracking the plans separately from children who receive insurance on their parents’ plans.
Because of competitive concerns, Waldron declined to share actual numbers, but he said that of all the applications they received for children, 41 percent were for child-only plans, while the rest were for children who would be part of their family’s plan.
Waldron said of those who applied for child-only plans, 36 percent had previous health issues. That compares with 22 percent of children who are insured under family plans and have pre-existing conditions. The costs of the plans vary significantly based on the child’s age and health history. But they are not big money-makers. Waldron said that Rocky Mountain will almost certainly lose money on the child-only plans, but it will continue to sell them because it’s the right thing to do.
“We’re a nonprofit. We’re focused on providing coverage to the entire community. So, for instance, in Grand Junction, we make sure all Medicaid (clients) have access to care. This is just another part of our mission, that we should not be denying coverage to those who seek it,” Waldron said.
Because the demand is not overwhelming, Waldron does not anticipate that children with pre-existing medical conditions will put Rocky Mountain into financial jeopardy.
He said he was concerned when the other insurance companies, aside from Kaiser, pulled out of the market.
“Quite honestly, I was surprised. I anticipated that all the commercial carriers would share in the risk. When we found out that only ourselves and Kaiser were doing it, it was a little nerve-racking, but we felt that we should offer the plans,” he said.
As costs for family plans rise, some parents are getting their insurance through employers while hunting for the most affordable plans for their children. In other cases, parents might not have insurance, but might want to be sure that their children are covered. In both of these cases, parents might seek child-only plans.
Among the supporters for the child-only legislation in Colorado are the Colorado Children’s Campaign and a coalition called All Kids Covered. Since lawmakers, advocates and insurance industry representatives are working together to support the bill, Cody Belzley, vice president of public affairs for the Children’s Campaign, is hopeful that the child-only market will be restored.
“This bill is about ensuring that kids and families have choices in health coverage and ensuring that Colorado kids and families can get coverage even if they have pre-existing health conditions. It’s also about ensuring that Colorado has a fair marketplace so insurance companies can do business in our state and provide care and coverage options for kids and families,” Belzley said.
“While we applaud Kaiser and Rocky Mountain, we want to secure a robust marketplace,’’ she said. “The worst-case scenario is that Rocky and Kaiser decide they can’t bear the risk and we wind up without coverage.”