Friday, December 10, 2010
2 Insurers Shift Rules for Kids' Coverage
By Winthrop Quigley
Copyright © 2010 Albuquerque Journal
Journal Staff Writer
Two of New Mexico's major health insurers are changing how they offer individual coverage to children as a result of the national health care overhaul enacted early this year.
The changes in children's coverage are an effort to cope with higher health care costs the Presbyterian and Lovelace health plans say they expect to incur under the new federal legislation.
More than 1,000 children a year could be affected by the changes, assuming historic enrollment trends continue.
Presbyterian Health Plan, beginning Jan. 1, intends to put all new applicants for individual insurance coverage younger than 19 years into a single risk pool and charge different rates depending on the child's health status. Children already enrolled in an individual plan would not be affected.
Lovelace Health Plan will accept all new children who apply into its existing individual insurance products, but only once a year during open enrollment periods. The next open enrollment will occur in July 2011. Applicants 19 years old and older can apply at any time.
The companies' group insurance plans are not affected.
Representatives of both companies told the Journal on Thursday that the changes are an attempt to control higher costs and greater risks all insurers that offer individual plans expect to face under federal rules that took effect Oct. 1. The rules require health plans to cover all children regardless of their medical conditions.
Insurers say that experience in states like New York and New Jersey, which implemented similar rules before the federal government did, shows that families enroll their sick children but often do not enroll their healthy children in an attempt to save money, a phenomenon known as adverse selection. If enough unhealthy members enter a pool containing existing members, premiums go up as the insurance companies try to spread the new, higher cost of medical care over all the pool's members.
State Insurance Superintendent John Franchini said Thursday that his department expects to approve Presbyterian's new product in enough time to avoid any break in coverage for children needing individual insurance. He added that the state-run Medical Insurance Pool also offers individual coverage. He said Blue Cross and Blue Shield of New Mexico has not announced plans to change the way it covers children seeking individual insurance.
Michael Murray, Presbyterian Health Plan vice president and chief actuary, said his company decided to isolate new children in their own pool and set premiums at a level that captures the costs and risks of insuring them. Murray said the rules, promulgated by the federal Department of Health and Human Services, don't allow insurers to deny coverage to sick children, but they do allow companies to set prices based on the customers' health status.
Lovelace considered creating a new product specifically for children but instead decided to allow them to enroll only once a year, said Marlene Baca, chief sales and service officer. That encourages families to enroll all of their children in a health plan rather than risk having an uninsured child becoming ill between open enrollment periods.
Before the new federal rules, insurers could refuse to insure any applicant for individual insurance on medical grounds, and the rules still allow denial of coverage to applicants 19 years old and older. Provisions of the law that take effect in 2014 will require insurers to cover everyone.
Murray said Presbyterian expects between 60 and 100 children a month to sign up for individual insurance coverage.
Devon Day of Day Financial LLC said families seek individual coverage for their children because they've lost insurance from their employers or they can't afford their employers' coverage. Some individuals find they can save hundreds of dollars a month by dropping employer group coverage and taking individual coverage, Day said.
She said that if all family members are healthy, they could pay as little as half as much for individual coverage as they pay for small group coverage provided by an employer.
The health plans are right to expect higher costs, Day added. "Whenever you have a guaranteed issue, the cost goes up significantly because of adverse selection," she said.