Thursday, July 29, 2010

Child Health Insurance Update

The market, or lack thereof, for children's health insurance is changing daily. I got a memo earlier today from Cigna stating that any policy written for a 10/1/2010 effective date or later that contains even one family member that is guarantee issue will pay $0 to the writing agent.

Barring further refinement, children's health insurance after 9/23 is essentially guaranteed issue. That means any child under age 18 is guaranteed to get health insurance coverage at some price.

The price is still a moving target but we expect children's rates to double from current levels and possibly even higher.

Compensation to agents is a small piece of the total pie which makes this a foolish move on the part of Cigna.

Of course it is things like this that give us our "Stupid Carrier Tricks" series.

Since agents will not be paid to place business with Cigna when an otherwise uninsurable child is part of the mix you can bet Cigna will not be included in the list of possibilities. Call this mercenary if you wish, but agents don't work for free.

Because of this move, Cigna will see fewer agent initiated applications of any kind and their average premium per application will fall.

Cigna has essentially removed themselves from the children's health insurance market except on policies written direct. House accounts are not free. There is an acquisition cost associated with self generated business and that cost is usually higher than agent driven business.

In this move, Cigna is willing to accept less business at a lower premium and when they do write business it will be at a higher acquisition cost than going through agents.

It remains to be seen if any other carriers will follow this path.
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