Congress passed a healthcare reform law this year in part to curb a series of abuses by insurance companies, particularly in the market for individual health policies. Some of its provisions take effect Thursday, providing more safeguards and benefits for consumers but also raising insurers' cost of doing business.
One of the new mandates is having an alarming effect on the insurance market. As of Thursday, insurers may not deny individual policies to children with preexisting conditions. The rule could affect more than 80,000 minors in California who aren't covered by their parents' policies or by state programs. In response, at least two major insurers — Anthem Blue Cross and Aetna — have announced that they won't offer individual policies in California to any children who don't already have coverage. Other companies are doing the same in states across the country.
It's a very unfortunate — but entirely predictable — reaction. Insurers argued throughout the healthcare reform debate that forcing them to make coverage available to all Americans without restrictions would lead consumers to go without coverage until they required expensive medical care — a form of "adverse risk selection" that would cause premiums to skyrocket. Lawmakers tried to guard against that by requiring all adults to obtain coverage, starting in 2014. But no such requirement applies to the individual insurance market for children.