Insurers to drop child-only plans

posted at 8:48 am on September 21, 2010 by Ed Morrissey

As Glenn Reynolds sarcastically asks, “Who could have seen this coming?”  Most of us outside of the White House understood that by forcing insurers to take on more risk while pressuring them to keep prices down, we would either see insurers stop offering certain policies or go out of business altogether.  ObamaCare advocates kept insisting that we had to help the children by proceeding apace with their government takeover of the industry.  The result?  Suffer the children:

Some of the country’s most prominent health insurance companies have decided to stop offering new child-only plans, rather than comply with rules in the new health-care law that will require such plans to start accepting children with preexisting medical conditions after Sept. 23.

The companies will continue to cover children who already have child-only policies. They will also accept children with preexisting conditions in new family policies.

Critics blast the insurers for their “immoral” decision, but they had little choice.  The federal government mandate requires them to accept any child at any time, regardless of any pre-existing condition, but doesn’t yet require parents of healthy children to buy policies for them.  It sets up an incentive system where this scenario will unfold repeatedly:

Robert Zirkelbach, a spokesman for AHIP, noted that insurers will be accepting children with preexisting conditions in other types of plans.

But, he said, extending such coverage in child-only policies “provides a very powerful incentive for a parent to wait until their child becomes very sick before purchasing coverage.”

Zirkelbach added that in 2014, when similar protections kick in for all individuals with preexisting conditions, virtually all Americans will be required to get health insurance.

With no such mandate currently in place, however, the result over the next several years could be that the pool of children insured by child-only plans would rapidly skew toward those with expensive medical bills, either bankrupting the plans or forcing insurers to make up their losses by substantially increasing premiums for all customers. And Zirkelbach said the effect could be compounded if only a few plans remain in the market.

This should be Econ 101, or at the least Insurance 101.  However, it’s the problem that ObamaCare advocates not only refused to fix, they refuse to acknowledge.  No one will buy a $3000 plan for comprehensive insurance for a child who is healthy, not unless it comes as part of an insurance plan for the whole family.  They might buy a catastrophic insurance plan for a few hundred dollars for use just in case the child gets sick, but that kind of plan won’t exist any longer under ObamaCare.  Now that the mandates for coverage exist for pre-existing conditions, parents no longer need to bother with that, anyway, as they are now in a no-risk position.  They can just wait to see if their child gets sick enough to need insurance, and then buy it.

The real truth is that hardly anyone under 40 needs the kind of insurance policy mandated by ObamaCare.  They would be much better advised to buy catastrophic insurance and pay for their minimal use of the medical system through HSAs.  Most younger people take one visit to a clinic each year, which would cost arounbd $150, for a physical, a far cry from the thousands they will have to pay for ObamaCare exchange policies.  They are being used to subsidize older members of the risk pool in order to keep insurers from going bankrupt under the weight of ObamaCare mandates for coverage.

No one should be shocked at this decision.  When government intervenes in markets for social engineering and political outcomes, the outcomes are always skewed and irrational.  This time, it’s the children that will pay.


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