Obamacare causes shortage of children’s health insurance

Obamacare is making it more difficult and costly to insure children.

A much ballyhooed provision of Obamacare was the requirement that insurance companies immediately begin covering children with new policies regardless of pre-existing conditions. In the legislative rush after Senator Scott Brown’s election, this provision was actually left out of the bill that finally became law. Without an effective date, it looked as though the provision might not go into effect until 2014 with most of the rest of the law. In response to the Democratic legislative boo-boo, HHS Secretary Kathleen Sebelius and America’s Health Insurance Plans (AHIP) quickly agreed that insurance companies would honor the intent of the law and immediately begin to issue children’s health insurance regardless of pre-existing conditions.

Recent reports indicate that the problem still might not be solved. In a striking lesson on economic incentives and the Law of Unintended Consequences, it appears that Obamacare‘s pre-existing condition provision might actually make it more difficult for parents to find affordable health insurance for their children.

In the past, child-only health insurance policies were relatively inexpensive. During my time as an insurance agent, such policies often sold for less than $100 per month. However, due to the recent regulatory changes, it has become more difficult for insurers to market child-only policies that don’t lose money.

The problem is that in the past parents had to buy policies for their children before they got sick. The premiums that they paid to insurers pooled the risk of illness for large numbers of children. Premiums went to pay for health care as well as administrative costs and, if the insurance company was well run, a profit.

Under the new law, parents no longer have to buy policies before their children become sick. In fact, the government has created an incentive for parents to wait until their children get sick to buy insurance. Because there will be a dramatic rise in the number of insured sick children, actuaries at the insurance companies realize that they will soon have to pay out much more in claims than before while premiums received are likely to stay low or even fall. Paying out more in claims without receiving more in premiums means that insurance companies lose money. If insurance companies lose money, they cannot stay in business.

In order to minimize their losses, some insurance companies are reportedly choosing not to sell child-only policies. Where parents could buy inexpensive coverage for their children in the past, they now must buy policies for the entire family in order to cover the children. It is also likely that the remaining companies in the child-only insurance market will increase their prices. Those companies who are not able to adapt will lose money and eventually go out of business.

It is likely that when (or if) the remainder of the Obamacare law goes into effect in 2014, a similar pre-existing conditions clause for adults will trigger an increase in premiums for other health insurance policies. We might even see entire insurance companies leaving the health insurance market or failing on a massive scale.

In the near future the Democrats will paint the situation as a failure of the markets and blame corporate greed rather than a failure of government control of the marketplace. They will probably portray another expansion of government power and control as the solution. In a vicious cycle, the new reform will have even more unintended consequences and require even more government regulation. This may even be part of a Democratic long-term plan to phase out private insurance companies and replace them with a single-payer plan.

It would be funny if it were not so tragic. The insurance reform that purported to lower costs and expand coverage is driving up costs and creating regulatory shortages. Less than four months into the elites’ grand plan to remake the American health insurance industry is in serious trouble and sinking fast.

Reform – Replace – Repeal

Sources:

http://www.msnbc.msn.com/id/36044366

http://www.nytimes.com/2010/03/31/health/policy/31health.html?_r=1

http://thehill.com/blogs/healthwatch/health-reform-implementation/110775-stronger-rules-for-childrens-health-coverage-may-raise-insurance-costs

http://www.ky3.com/news/local/96623269.html

July 30, 2010
Houston TX

Photo credit:
Tom Clare

http://www.freedigitalphotos.net/images/view_photog.php?photogid=947

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9 Responses to “Obamacare causes shortage of children’s health insurance”

  1. Bruce Says:

    Ironically, there is low-cost, guaranteed issue products that provides comprehensive benefits and lower pricing for children, including those with special health needs that private insurers and markets are doing everything in their power to avoid.

    Those products is called Medicaid or the Children’s Health Insurance Program (CHIP). Despite providing coverage to all children, regardless of prior medical conditions, Medicaid and CHIP do so at less expense than health coverage delivered by private health plans that are serving only health kids.

    Also, Medicaid and CHIP are largely offered through private health plans themselves, but don’t have the gaming, medical underwriting, marketing, and excessive administrative costs associated with spending time avoiding risk rather than delivering quality health care at low cost.

    Heatlh reform was desperately needed precisely because the insurance marketplace was not delivering for those that needed it, including kids with pre-existing conditions such as cancer, cerebral palsy, asthma, etc.

    So, the nation could have done nothing and left 9 million children as uninsured (many uninsurable by private plans) or move forward. I am glad to see we are moving forward and figuring out how to address problems as they come. The Administration just issued guidance clarifying private plans can issue policies during open enrollment periods, which seemed to solve the problem raised above. Change is good and let’s hope there is no going back to the “good ‘ole days” of denying care to sick kids.

  2. captainkudzu Says:

    Bruce, sick kids were never denied care. The issue is one of who pays and how much.

    Medicaid is in big trouble and will be bankrupt soon unless something is done. Doctors are refusing to accept it in large numbers because the government set price controls that don’t pay market rates.

    Now it looks like we may be dumping more kids onto the Medicare rolls because the $44 policy is not going to be available as it once was. Many families that could afford to pay the child’s policy will not be able to afford the family policy for several hundred dollars.

    I think that is exactly what many Democrats had in mind to begin with.

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  4. Obamacare: A Real Reform? | InsureMe.us Says:

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