Is HHS Compromising with Insurers?

Pardon the football analogy, but it's fall:

It's fourth and ten and the Department of Health and Human Services (HHS) is just out of field goal range. They've been driving hard to an end zone with the words "Affordable Care Act" painted in big letters, but with a comfortable lead and plenty of time on the clock, the smart thing to do is, of course, to punt.

That's exactly what HHS did with the ACA's current 800-pound gorilla: ensuring children with preexisting conditions can get healthcare coverage.

In an October 13 letter from Secretary Sebelius to the National Association of Insurance Commissioners (NAIC), HHS attempted to stem the recent trend among healthcare payers to drop "child only" health plans by clarifying policies that aren't explicitly forbidden by the Act.

Among those clarifications, HHS says insurers are within their rights to (if permitted by state laws):

• Maintain separate "child-only" policies separate from closed policies;
• Penalize members that drop coverage and subsequently reapply;
• Set the number and length of open enrollment periods; and
• Adjust rates based on members' health status.

I'm not sure HHS' statement that health insurers reneged on a "previous commitment make in a March letter to 'make preexisting condition exclusion a thing of the past" is truly accurate.  After all, by dropping child-only policies, health plans were basically forfeiting a game they considered unwinnable.

But the letter was obviously meant to encourage insurers to reconsider child-only coverage, and perhaps make a good faith effort to ensure health plans that HHS wasn't trying to bankrupt them.

For its part, the insurance industry—via Karen Ignagni, President and CEO of America's Health Insurance Plans (AHIP)—issued a typically dramatic statement—essentially indicating that the provisions have now allowed millions of children to receive access to affordable healthcare coverage.

So are HHS and health insurers now on the same page? They're getting closer, perhaps. But both are still at the mercy of the states. In issuing clarifications that do not preclude regulations already in place—many that just recently emerged when insurers began dropping child only policies—HHS has effectively punted oversight back to the states, at least until healthcare reform officially gets its teeth in 2014.

And as we well know—states have jumped into action taking an aggressive stance against insurers that drop child-only plans. For instance, California health plans are barred from issuing individual market policies for five years if they chose not to offer child-only coverage.

Since the ball is in the hands of state regulators, the best HHS can do is ask them to take any possible action—even to the point of seeking legislation—to "preserve options for children to obtain coverage regardless of their health status." In other words: play nice, like we have.

It's a fine line ensuring the solvency of insurers while providing a key provision of healthcare reform: ensuring already-sick kids can receive healthcare coverage. HHS and health plans appear to be walking it, albeit precariously, together. The question is will the states join them?