Wednesday, September 29, 2010

Obamacare Wipes Out Health Care For Children

Matthew Shaffer lays out the case for why Obamacare was responsible for wiping out the market in child-only health insurance policies.

Insurers say the blame for their withdrawal lies not with them, nor even with the Obama administration’s general desire to extend health coverage, but rather with a single, hastily written provision of Obamacare. As the bill was being negotiated, insurers accepted that it would prevent them from denying coverage to those with pre-existing conditions, but they assumed that other means of managing risk — such as pricing, co-payments, and restrictions on coverage — would still be available. So insurers were surprised to discover that the law essentially required full “guaranteed issue” and banned price discrimination across the child-only market, regardless of clients’ risk profiles.


[Health Care for America Now (HCAN) communications director Avram] Goldstein thinks that argument is misleading. “When the industry expressed reservations about the rules, the Obama administration accommodated them,” he explains. “HHS Secretary Sebelius and her staff added in the ability for insurers to create open enrollment periods, so that a child who suddenly developed a health problem could not just rush over and buy a policy that would be guaranteed issue. Instead you have to say during the year, when you don’t know if you’re sick, whether you’ll enroll. They tried to accommodate insurers.”

This is true, but insurers still have good reason to be skittish. [America’s Health Insurance Plans] explains insurers’ uncertainty with a thought experiment: Suppose twelve different insurers each had an enrollment period in a different month of the year; then parents could still wait until kids got sick to purchase insurance, because they could simply pick the insurer that was enrolling that particular month.

Shaffer doesn't quite connect the final dots, though. The basic problem is that the goal behind setting up an open enrollment period is at odds with that of providing health care for all. Suppose a parent wants to sign up a kid for a child-only policy. If there are many open-enrollment periods scattered throughout the year (from different insurers), then adverse selection allows the parent to wait until the kid is sick before signing up. If there are few open-enrollment periods, though, then the kid may have to wait an arbitrarily long time before getting covered.

It's a teeter-totter: when one side goes up the other goes down. You can attempt to balance the tension between the two, but you cannot resolve it.

UPDATE: I forgot to link to the article in the original posted. That oversight has been corrected.


  1. When you excerpt from a web page you should include a link to it.

  2. @Randall: You're absolutely right. I've made that correction.