So You Wanted to Insure Children With Pre-Existing Conditions?

Kids Receive No Benefits From The New Law Changes

I wanted to convey a few thoughts on the recent changes on health care options for children since October 1st. It is often a difficult task to look in the future and try to anticipate the implications of new policies or changes. As readers have known, I was fearful of the legislation changes in the Health Care Reform Act, and it is beginning to be clear that those concerns were well founded.

Every Child Left Behind

Since the establishment of rules requiring children with ANY condition to be covered, health insurance companies starting with Blue Cross Blue Shield of Texas dropped the ability for children to obtain child-only policies. In other words, if you have your own coverage at work and you just want to obtain health insurance coverage for your child with a health carrier in Texas, you are now out of luck! If your child is healthy or sick, it doesn't matter you can't even apply. If you don't believe me, just try running a quote for your child under the age of 19 on our Get A Quote page.   You won't be able to do it, in fact, we now get two to three calls a day asking why parents can't run quotes for their children.

Everyone Can Get Coverage, But No One Can Afford It!

The government is just trying to do a good thing right? Who can blame them, they are simply trying to get coverage for the uninsurable children, so despite the fact that kids can't have their own policy isn't it a great thing that they now have access to health coverage? The answer here is yes, but really, what is the cost? In my experience each child that we've encountered that did have a pre-existing condition could not obtain coverage anyway. Why? Unfortunately, because a policy is available, doesn't mean that it is affordable. After October 1st of this year, we've seen an amazing thing happen. Parents with a child with a pre-existing condition were slapped with huge rate ups on the base premium on the child portion of the policy. We are not talking about a 50% rate up or even a 100% rate up, we are seeing 300% rate ups over the base rate in at least two different cases.

Let's Do The Math So It's Even More Clear

Our child applicant's portion of the coverage was going to be $120 a month at the time of application. Once we received the decision, we found that the new premium would now be $480! Remember, we didn't just attempt to obtain coverage for the child, there was another health premium of $350 a month for the parent. So given the new legislation, we now have the opportunity to obtain coverage for just two people at a cost of $830 a month. Needless to say, our clients did not take the most generous offer.

Compliance Without Compliance

Effectively, the insurance companies have managed to comply with the rules of the legislation, but make it so unaffordable that no one in fact will insure their child. In addition, by removing the option to have child only policies, I am guessing that they have also shed a block of business that didn't richly reward them anyway since premiums were often pretty low and children actually go to the doctor quite often. (This is my guess, I have not seen any facts related to the profitability of that block of business for that demographic group). In a sense, the insurance companies have gone out of their way to comply with the letter of the law, but certainly have not kept the spirit of the intention of the law. But before we hammer them for being terrible and unjust and focused on the almighty dollar, remember that they are simply maximizing their return on their capital. The reality is that given the structure of the system, these companies would certainly go under if they kept their policies in line with the spirit of the law. The federal government is simply creating sweeping legislation that addresses none of the structural issues related to cost increases of medical services. In fact, in my opinion the law changes just add to the drain on resources and the government looks to add demands on the system without adding any more resources.

Nowhere To Go

Let's go further. We've written in past posts about two other options for health coverage for those with pre-existing conditions, perhaps those would provide more affordable coverage options now? The Texas High Risk Pool and the Federal PCIP plan essentially both require an applicant to have been declined to be admitted to their insurance program. (Yes the Texas High Risk Pool will take an agent certification so no actual decline is required). Unfortunately though, neither plan allows an applicant into their health insurance program if the coverage is "too expensive". So where are these children that can get coverage but can't afford it going to get coverage? CHIPS (Children's Health Insurance Program) may be a resource as there is a mechanism that tests the cost of insurance relative to the income of the household. Perhaps that is where all of these kids will obtain health insurance coverage? If a family does have financial resources that are greater than CHIPS allows, what are they do to? Unfortunately there are no easy answers. I guess they'll need to wait a few more years for the "Patient Protection and Affordability" portion of the bill to kick in.

Trapped With No Choice

Finally, I want to highlight one other issue I've seen related to the changes in health care. I have another client that can barely afford the health insurance plan they obtained for their child two years ago. This child is covered with a child only plan with a $1,000 deductible. On November 1st, the policy premium increases like it does almost every year. Unfortunately, this client cannot afford the $20 a month increase that will be charged, so we need to examine her coverage choices. Since the changes in the law, this child is in more of a predicament than ever. Since there are no other child-only policy options available with other carriers, we only have one choice, which is to increase the plan deductible to attempt to drive down the monthly premium. The net impact here is that this child is now facing higher premiums, higher deductibles, AND the loss of choice related to the implementation of the Health Reform Act. Ultimately, if the parent's don't earn more money, this child's parents will drop coverage or seek to enter the CHIPS plan as the premium on this existing policy continues to rise.

To wrap this up, I have to say that this is just another perfect example of how the market is impacted with greater involvement by government. We were promised more coverage, more choice, and more affordability. I have yet to see any of those promises materialize. If you are inclined to suggest that we will see these things happen in 2014, I can only say that based on the things I am seeing now, that is simply wishful thinking. In the meantime, children will be suffering from the impact of poorly thought out laws.

Jason W Bohmann
Texas Health Design