Back to school: Availability of child-only health insurance coverage dwindles

John Egan and Nick DiUlio

If you’re hunting for a health insurance policy to cover just your children or grandchildren, you may be out of luck.

A new report from the U.S. Senate Committee on Health, Education, Labor and Pensions shows health insurers in 17 states aren’t offering child-only plans to new enrollees. The 17 states are Alaska, Arizona, Connecticut, Delaware, Florida, Georgia, Idaho, Minnesota, Nebraska, Nevada, North Dakota, Oklahoma, South Carolina, Tennessee, Texas, West Virginia and Wyoming.

This means that unless children are eligible for Medicaid, the Children’s Health Insurance Program (CHIP) or a high-risk insurance pool, the kids must be added to their parents’ or grandparents’ policies — or go without health insurance.

The report also says that 39 states have seen at least one health insurer exit the market for child-only insurance plans.

Unhealthy situation: Child-only health insurance policies are unavailable in 17 states, according to a new report.

Senator: ‘Do something immediately’

U.S. Sen. Mike Enzi, a Wyoming Republican who is the ranking member of the Senate Committee on Health, Education, Labor and Pensions, says the U.S. Department of Health and Human Services has failed to remedy this situation.

Enzi says the Obama administration “must do something immediately to address the issue that 17 states do not have access to child-only health plans because of the new health care law.” One solution from Enzi would be to let parents and grandparents in those 17 states buy child-only policies in states where they’re still available.

Under a provision of the federal health insurance reform law, health insurance companies can’t decline coverage or issue riders (provisions that allow changes and limits to coverage) for people younger than 19 who have pre-existing conditions. After the law took effect in 2010, some insurers stopped offering child-only coverage.

“Requiring carriers to sell child-only plans to anyone at any time allows individuals to wait until a child is sick and then purchase coverage,” the Senate committee’s report says. “This undermines one of the fundamental principles of insurance, which allows individuals to manage risk by pooling resources to help pay for future, unpredictable expenses. If an individual can avoid paying premiums until they know they will incur an expense, it is impossible for such a system of insurance to be financially sustainable.”

Alex Forrest, an independent insurance agent in South Carolina, says this has hurt some people because the child-only plans typically are cheaper than adding a child as a dependent on a parent’s or grandparent’s plan — especially after age 5, when most routine vaccinations and preventive pediatric care are finished.

Sebelius: Insurers broke their promise

In a letter in October 2010, U.S. Health and Human Services Secretary Kathleen Sebelius accused some health insurers of backing away from a promise to “make pre-existing condition exclusions a thing of the past.” She said the decision by some health insurers to stop selling new policies geared toward children was “extremely disappointing.”

The health care reform law, Sebelius wrote, “was designed to ensure that Americans who need health insurance are no longer denied access to the care they need – and that includes the youngest and most vulnerable Americans. We have been working closely with the states in their role as insurance regulators and with insurance companies to find ways to improve access to coverage for America’s families.”

America’s Health Insurance Plans, a lobbying group for health insurance companies, has said it’s working with insurance regulators to stabilize the market for child-only plans.

Alternatives to child-only coverage

In the meantime, how do you cope with the lack of new child-only coverage?

Forrest says that for those who get health insurance through a small employer, it’s often best for the dependent spouse (the one who is not a member of the employer plan) to take out an individual health insurance policy and cover a child on that plan. (Small businesses employ the majority of Americans.) If the dependent spouse already is on the employed spouse’s plan, compare the costs. It may be cheaper for that spouse to no longer remain covered by the employed spouse’s plan and buy his or her own policy for the sake of covering the child.

“Individual plans are almost always cheaper anyway,” Forrest says. “They can do more underwriting, can decline people and can exclude conditions they don’t want to cover. People get mad about that stuff, but the pricing is the upside. That’s just the way it is.”

Another alternative for parents and grandparents is to buy a short-term health insurance plan for children. These plans provide basic major medical coverage (usually with few frills) on a temporary basis, typically up to 11 months. The advantage here is that these policies are inexpensive, often between $90 and $100 a month. The disadvantage: They cover a kid for only a limited amount of time.

“It’s really a great alternative for those who can’t afford to cover a (child) otherwise,” Forrest says. “I tend to suggest it to those for whom the price of health insurance in general is not doable right now, either because the parents are out of work or something (else). It’s also good for a situation where the parents can’t get major medical insurance right now due to health issues but need something for their kids.”