Health Law May Cost Children Coverage as UnitedHealth Ends Plans

By Alex Nussbaum for Bloomberg

UnitedHealth Group Inc. and insurers in Florida and Oklahoma stopped offering children-only health coverage because of the potential added costs of sick youngsters under the new U.S. health-care law, state officials said today.

UnitedHealth’s Golden Rule subsidiary won’t sell new policies that cover only children, foreclosing an option for parents seeking cheaper care, Kevin McCarty, Florida’s insurance commissioner, said at a meeting of the National Association of Insurance Commissioners in Washington, D.C. Tyler Mason, a UnitedHealth spokesman, disputed the statement in a telephone interview, saying the company still issues such coverage.

The law championed by President Barack Obama bans insurers from denying coverage to children based on their health. That makes it more difficult for health plans to predict costs because families can wait until a child is sick to buy coverage, according to Kim Holland, Oklahoma’s commissioner. She and Sandy Praeger, Kansas’ commissioner, said insurers in their states have dropped child-only plans as well, or discussed the idea.

“A parent that’s losing coverage and may only be able to afford to cover their child, they’ll have limited if any options,” Holland said at a news conference. Among Oklahoma’s 500,000 uninsured are “some percentage of children that might have had access to coverage and that’s going to be difficult.”

Already Covered

The commissioners said it’s unclear how many children nationwide are covered under the policies. The insurance companies are continuing to serve youngsters already in such plans, Holland said.

While families may put children on state-subsidized health plans or the Medicaid program for the poor, those plans have income limits, Holland said. New high-risk insurance pools set up by the health overhaul only cover people denied because of pre-existing conditions and without insurance for six months or more, she said.

UnitedHealth, based in Minnetonka, Minnesota, is the largest insurer by sales. The company hasn’t left the children- only market, Mason said.

“Where we have been writing these policies, we are still writing them,” he said.

The insurer’s shares declined 8 cents, or less than 1 percent, to $30.92 at 4 p.m. in New York Stock Exchange composite trading. UnitedHealth has gained 14 percent in the past 12 months.

6.2 Percent

A 2009 study by EHealth Inc., the online insurance broker, found 6.2 percent of individual policies were written for children younger than age 18, said Sande Drew, a spokeswoman for the Mountain View, California-based company, in an e-mail. That represented about 20,000 policies, Drew said.

The Obama administration is ‘disappointed that a small number of insurance companies are taking this unwarranted and unnecessary step,” said Jessica Santillo, a spokeswoman for the U.S. Health and Human Services Department, in an e-mail. “We are working with the insurance industry to help ensure that quality coverage is available nationwide for children with pre- existing conditions.”

The commissioners’ association is helping the Obama administration draft rules to implement the health overhaul signed in March. The group has approached the federal health department seeking a way to address the problem, Holland said.

The issue may be a harbinger of 2014, when the health law requires insurers to cover adults regardless of medical condition, said Praeger, Kansas’s commissioner. While the legislation requires all Americans to find coverage, insurers have said its penalties are too low to force people to comply.

Shrinking Base

That may drive the cost of insurance up as companies struggle to cover rising medical costs on a shrinking customer base, Florida’s McCarty said at the news conference.

“The impact it will have on the cost of insurance for everyone, you can’t underestimate that,” he said. “It’s going to add a significant amount to the cost.”

One option may be to let people buy insurance only during one or more enrollment periods each year, said Holland. Those who missed the window would be unable to jump onto a policy until the next period, encouraging customers to keep continuous coverage, she said. Holland and Praeger said they’ve discussed the idea with state insurers as well as the administration.