Menu
As we enter the 6 month mark of the passing of the health care reform we are witnessing the first negative impacts.
This week, almost every big insurance company in America—including Aetna, Cigna, UnitedHealth Group, WellPoint, Humana, Coventry, some Blue Cross Blue Shield affiliates and others—stopped writing “child-only” policies in the individual market. This is a niche product that parents typically buy when their employer health plan doesn’t pay for dependents. The exact plans vary company to company and state to state, and the insurers will still offer family policies and make good on the child-only policies that they’ve already sold. But most won’t be writing new ones.
The reason is a regulation that President Obama mentions every time he talks about health care, as he did recently in Falls Church, Virginia: “Children who have pre-existing conditions are going to be covered.” Insurers are now required to cover everyone under 19 when their parents apply for coverage, regardless of health status. The problem with this kind of “guaranteed issue” is that it encourages people, in this case parents, to wait until their kids are sick before seeking coverage.
This drives up premiums for the healthy, encouraging consumers in turn to drop coverage, and eventually it leads to what’s known as a “death spiral,” the industry term for an insurer with rapidly increasing costs as a result of population changes in its coverage pool. The child-only market is a particular death-spiral risk because it is so small and unstable, which explains why so many insurers left in a stroke.
The collapse of the child-only market is a preview of what will happen when guaranteed issue and the rest of ObamaCare comes on line in 2014 for adults, except then insurers will have nowhere to flee. Exiting the market will mean going out of business.
