Major health insurance companies in California and other states have decided to stop selling policies for children rather than comply with a new federal healthcare law that bars them from rejecting youngsters with preexisting medical conditions.
Anthem Blue Cross, Aetna Inc. and others will halt new child-only policies in California, Illinois, Florida, Connecticut and elsewhere as early as Thursday when provisions of the nation's new healthcare law take effect, including a requirement that insurers cover children under age 19 regardless of their health histories.
The action will apply only to new coverage sought for children and not to existing child-only plans, family policies or insurance provided to youngsters through their parents' employers. An estimated 80,000 California children currently without insurance — and as many as 500,000 nationwide — would be affected, according to experts.
Insurers said they were acting because the new federal requirement could create huge and unexpected costs for covering children. They said the rule might prompt parents to buy policies only after their kids became sick, producing a glut of ill youngsters to insure. As a result, they said, many companies would flee the marketplace, leaving behind a handful to shoulder a huge financial burden.
The insurers said they now sell relatively few child-only policies, and thus the changes will have a small effect on families.
"Unfortunately, this has created an un-level competitive environment," Anthem Blue Cross, California's largest for-profit insurer, said in a statement declaring its intention to "suspend the sale of child-only policies" on Thursday, six months after the healthcare overhaul was signed.
The change has angered lawmakers, regulators and healthcare advocates, who say it will force more families to enroll in already strained public insurance programs such as Medi-Cal for the poor in California.
The White House weighed in Tuesday, condemning Anthem corporate parent WellPoint Inc. and others that plan to stop selling child-only policies.
"It's obviously very unfortunate that insurance companies continue to make decisions on the backs of children and families that need their help," White House Press Secretary Robert Gibbs said at a news briefing.
The Obama administration had told insurers they could solve the problem by issuing policies only during designated enrollment periods. Some White House officials, however, noted that families who can't find policies might be able to sign up for high-risk pools being set up around the country as part of the new healthcare law.
In California, the stakes may be particularly high for insurers who abandon child-only policies. A bill awaiting Gov. Arnold Schwarzenegger's signature would bar such companies from selling insurance in the lucrative individual market for five years. A Schwarzenegger spokeswoman said the governor had not yet taken a position on the measure.
Assemblyman Mike Feuer (D-Los Angeles), the bill's author, voiced frustration over the insurers' plans and singled out Anthem Blue Cross, whose corporate parent notified brokers nationwide Friday of its decision to exit the child-only business in 10 states, including Colorado, Connecticut, Missouri, Nevada and Georgia as well as California.
"At a time when we are launching a national approach to ensure that all children have access to healthcare, Anthem's actions represent a step backwards," Feuer said. "By threatening to drop child-only policies in California, the company jeopardizes the health of families and children. I call on Anthem to reconsider its plan."
Other regional and national insurers also plan to stop selling insurance policies exclusively for children. Among the companies is UnitedHealth Group Inc., the nation's largest insurer by revenue. It did not say which states would be affected.
"We continue to believe that regulations can be structured that will enable child-only plans to be offered, and we are working toward that goal," spokesman Tyler Mason said.
Aetna said that effective Oct. 1 it would no longer offer policies in the 32 states where it conducts business, including California, Florida, Illinois, Virginia and Pennsylvania.
Cigna Corp. will halt the policies in 10 states, including California, Arizona, Colorado, Tennessee and Texas.
"We made a decision to stop offering child-only policies to ensure that we can remain competitive in the 10 markets where we sell individual and family plans," Cigna spokeswoman Gwyn Dilday said. "We'll continue to evaluate this policy and could reconsider changing this position as market dynamics change."
The explanations left healthcare advocates fuming. They accused insurers of trying to skirt the law's new requirement to cover children with health problems.
"Insurers need to decide if they are in the business of providing care or denying coverage," said Anthony Wright, executive director of Health Access California, a consumer group. "In California, we hope our insurers come to an equitable compromise that allows access for all children and affordability for those with preexisting conditions."
In Colorado, regulators and insurance carriers are trying to work out such a compromise. The state's insurance commissioner met Friday with several insurers, including Anthem, Cigna and Aetna. The two sides did not reach an agreement, but officials remain hopeful they can broker a deal before Thursday.
"Obviously this deadline looms large," said Jo Donlin, director of external affairs for the Colorado Division of Insurance. "The commissioner wants families to have access to the insurance they need. Both sides of this want to find a solution."
Noam N. Levey in the Washington bureau contributed to this report.