What’s Happening to Child-Only Health Insurance Coverage?

If you have a child-only health insurance policy for your minor offspring under age 19, hang on to it. In the wake of sweeping health care reform last March, many major health insurance companies made the business decision to discontinue writing new child-only policies. This allows them, at least for the time being, to circumvent the expense of underwriting health insurance coverage for all children under 19, regardless of whether they have pre-existing conditions. Insurance companies who have or are going to take this action, maintain it will not affect existing child-only plans as long as you pay the premiums on time and don’t default on any other provisions of your policy.

If you question the fairness of this decision consider this: You can’t wait until your house burns down to buy homeowner’s coverage, but under the new federal requirement, health insurers fear that’s exactly what some parents might be tempted to do. They will wait until a child becomes ill and then purchase a child-only health insurance plan. For-profit insurance companies stay profitable by weighing statistical risk, essentially betting on the statistical likelihood that premium income will outpace claim payouts. Open up the floodgates to patients who are already ill and the insurance carriers are faced with the prospect of tens of thousands of claims. Yes, it will ensure that sick children get coverage but it will also ensure that premiums for everyone increase to balance the books and keep the insurer in business. We’ve already seen what mandated coverage for non-essential procedures has done to insurance premiums over the past decade. Now we’re looking at flooding the market with millions of new policyholders who haven’t put a bit of skin into the game.

We’re also facing a strain on the healthcare providers. Imagine your supermarket on the day before a big holiday. Every register is open but they can only process so many people in a given period of time. Suddenly, 100s of new customers jump into the already-crowded lines. Anyone who has ever stood in a check-out line watching her ice cream melt should be able to grasp this analogy.

To date, eight health insurance companies have stopped selling child-only health insurance policies. Their decisions only affect certain states, and don’t apply to existing child-only policies or kids’ health coverage through their parents’ employer-provided family and group health policies.

By 2014, this may all be moot. That’s when every health insurance company still standing will be required by federal law to cover every man, woman and child with a pre-existing condition. If you can’t wait that long, you may qualify for your state’s high-risk health care pool. Eligibility rules, annual deductibles, annual and lifetime caps and monthly premiums vary from state to state.