As the Affordable Care Act is implemented across the nation, states have taken varying approaches to making sure coverage is available for all children. While most states have done a good job maintaining and ensuring the availability of health insurance for kids, Oklahoma has taken an enormous step backwards by changing state law to restrict coverage for newborns and babies. This post explains the series of events leading up to a recent move by the Insurance Commissioner to pass an unprecedented and short-sighted emergency rule that makes it impossible for some babies to get health insurance in the state.
Beginning in September 2010, the Affordable Care Act prohibited new health plans from denying coverage to children based on pre-existing conditions. In some instances, insurers withdrew from the child-only market rather than comply with the guaranteed issue rule. It’s very important to note that this did not include policies that are sold to adults with children as dependents – just child-only policies sold on the individual market. Such policies are often sold to parents whose employers don’t have coverage or to grandparents on Medicare who are the primary caregivers to their grandchildren. In thirty-three states, caregivers are still able to access child-only plans. In fact, some states had guaranteed-issue for children even before the federal health care law.
However, seventeen states initially reported that no carriers were selling child-only plans to new enrollees after the guaranteed-issue rule went into effect. Many of those states have since taken action to ensure that all their children are able to get coverage. Colorado passed a law that mandated participating insurers cover children. The legislation included sensible provisions to protect insurer profits – like a hefty surcharge for caregivers who drop coverage then re-enroll when their children got sick. Kentucky’s Insurance Commissioner passed a rule that insurers participating in the state’s individual market had to cover children. California passed a law barring insurers from participating in their market for five years if they withdrew from the child-only market.
How did Oklahoma respond? Our Insurance Department made a downright Faustian bargain with insurers: In exchange for re-entering the child-only individual health insurance market, state regulators agreed to exclude babies up to 1 year old from coverage altogether. The state permitted babies to be uninsurable in the child-only market in Oklahoma by law. According to the Insurance Department, this is what insurance companies said they needed to reenter that market.
Why this age group is more risky (or less profitable) for insurers is a bit of a mystery. A child can just as easily come down with an expensive life-threatening illness at 13 months as at 11 months. Proponents of the rule have informally hinted at one insurer’s consternation over a supposed ‘million-dollar-baby’ in Oklahoma. However, insurers are supposed to take on risk, it’s the very essence of their business model and business is booming. Insurers in Oklahoma made about $25 million in after-tax profit last year in the individual market alone – which doesn’t even include profits from the large group market, where most Oklahomans get their health insurance. Why the Insurance Department chose to accept such a radical demand from the industry is the real mystery.
Perversely, it’s the healthiest babies that are most affected. There are two high-risk pools for individuals with pre-existing conditions currently operating in the state. However, only those who are uninsurable because of serious health conditions are eligible for the state-funded pool and only those who have been uninsured for at least 6 months are eligible for the federally-funded pool. Under Oklahoma’s new rule, insurers don’t have to offer coverage to healthy babies through a child-only plan anywhere in the state, period. Caregivers with healthy newborn babies who aren’t eligible through an employer or make too much money to cover their baby through Medicaid, i.e. a successful entrepreneur or a grandparent on Medicare, are out of luck.
The Insurance Department, with the stamp of approval from Governor Fallin, has thrown the baby out with the bathwater. It appears they’ve unilaterally ceded to insurers’ demands instead of taking action to protect and defend Oklahoma children, all the while blaming the new federal health care law. Such a strategy may provide political cover, but it’s bad policy. They could easily have made rule changes at the state-level to keep the child-only market viable without offering up newborn babies as a bargaining chip. They simply chose not to.