The Kentucky Department of Insurance has given insurers more information about how it wants them to interpret a November 2010 order governing sales of child-only health insurance.

An insurer should apply group health market rules for “qualifying events” when deciding whether a child can buy individual child-only coverage using special enrollment period rules, Kentucky Insurance Commissioner Sharon Clark says in a child-only coverage advisory opinion.

Children who have state or federal “risk pool” coverage — coverage for people with health childproblems — can buy child-only coverage during special enrollment periods on a guaranteed-issue basis, Clark says.

Children with other types of health coverage, or access to other types of coverage, cannot buy child-only health coverage during special enrollment periods, Clark says.

The child-only coverage rules do not limit the price of the child-only coverage, Clark adds.

“Nothing in this order shall prohibit an insurer from setting a premium rate for individuals based upon medical underwriting so long as such rate is in compliance with the applicable product’s rate filing on record with the Department of Insurance,” Clark says.

Special Enrollment Periods

The Patient Protection and Affordable Care Act (PPACA), a component of the federal Affordable Care Act package, now requires health insurers that sell stand-alone health coverage for children under the age of 19 to sell the coverage on a guaranteed-issue basis.

To discourage parents from paying for coverage only when a child is sick, the Kentucky department has limited the times of the year when coverage is available.

A family can buy guaranteed-issue coverage for a child at any time during the year if the child has undergone specified qualifying events that are described in Kentucky Revised Statutes Section 304.17A-220(10).

The statute was originally written to help determine when state-regulated group health plans can apply pre-existing exclusions because the insured has gone without creditable health coverage.

The events include:

  • Exhaustion of Consolidated Omnibus Reconciliation Act (COBRA) group health benefits continuation coverage.
  • Legal separation.
  • Divorce.
  • Death of the employee.
  • Termination of employment.
  • Reduction in the number of hours of employment.
  • Employer contributions toward the coverage were terminated.
  • A situation in which an individual incurs a claim that would meet or exceed a lifetime limit on all benefits.
  • A situation in which a plan no longer offers any benefits to the class of similarly situated individuals that includes the individual.
  • A situation in which the employee was offered through a health maintenance organization or other arrangement in the group market that does not provide benefits to individuals who no longer reside, live, or work in a service area and, loss of coverage in the group market occurred because an individual no longer resides, lives, or works in the service area.

The reference in the child-only coverage order to a group insurance statute confused some carriers, but the carriers should apply comparable rules to the individual market, Clark says.

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