Insurance industry turns focus to children without coverage

Health plans are trying to catch the business created by children left uninsured, ineligible for Medicaid or State Children's Health Insurance Programs, or not covered by a parent's or guardian's plan at work.

Aetna, UnitedHealth Group, BlueCross BlueShield-affiliated plans and other insurers are selling such plans on an individual and group basis, though they say most of their growth is in the individual market.

Families who can afford insurance for children in the household sometimes go without because a child isn't technically a dependent of the worker, or because coverage from work is too costly, said Randy Starnes, director of individual products for BlueCross BlueShield of Texas, a unit of Health Care Service Corp. That company's BlueCross BlueShield of Illinois unit sells such plans as well.

Starnes said the Texas company began to market child-only plans after examining enrollment data and finding a surprising number of individual policies were already written for children alone.

"It's not a far reach to recognize that the traditional makeup of a contract doesn't always work," he said. "In Texas we have a lot of social programs obviously devoted to providing good and adequate [coverage], but they're always income-related, and not everybody qualifies for those programs."

He said some employers will cover part of their employee's health insurance costs, but require the employees to pay the full cost of dependents.

That means for some people, the cost of a child-only plan purchased in the individual market ends up being cheaper than adding a child to coverage at work, he said.

Sherri Camp, national operations leader for the administration performance review practice of the consulting firm Watson Wyatt Worldwide, said the number of companies auditing dependents enrolled in health plans has risen over the last three years, following successes by big airlines in cutting costs by pulling out ineligible participants.

Those can be adults, but some are children who are not actually dependents of the adults who add them to their health insurance. The reasons ineligible children are enrolled varies, she said.

"It could be divorce situations, an employee who was never removed from the plan. It could be dependent children that have reached a maximum age but are no longer in school on a full-time basis, as is required by many plans," she said. "You really don't know if the last names are the same and I'm covering my husband's niece, until they're asking for a birth certificate."

On average, Watson Wyatt clients are removing 8% to 12% of dependents from their health plans following audits. Other organizations have seen as many as 23% who turned out to be ineligible, she said

The niche market for child-only individual policies doesn't necessarily call for an entirely new kind of insurance, Starnes said. "We didn't really create a new product," he said. "We say, 'Let's just change the way we offer products.' "

The Blues simply made sure its brokers knew that individual policies for dependents were available, and that has been enough to drive good sales, he said. Like most individual policies, they are underwritten for age, sex and location, he said. For example, a more benefit-rich policy for a boy in the Dallas area will cost around $140 per month, but bare-bones coverage can be had for a child for as little as $50 per month.

Now child-only policies make up about 13% of the company's individual business, about 18,000 children and $7 to $8 million in premiums per year, Starnes said.

"More importantly, it gives us the ability to expand our role and cover children who would otherwise join the ranks of the uninsured," he said.