Lacking a public option, the major check on insurance company price increases and abuses in the new health reform law is managed competition and regulation. That check is already being put to the test by the insurance companies.

In six months, the new law says children can no longer be denied care for pre-existing conditions. But the insurance companies immediately said they’d found a loophole:

Insurers agree that if they provide insurance for a child, they must cover pre-existing conditions. But, they say, the law does not require them to write insurance for the child and it does not guarantee the “availability of coverage” for all until 2014.

William G. Schiffbauer, a lawyer whose clients include employers and insurance companies, said: “The fine print differs from the larger political message. If a company sells insurance, it will have to cover pre-existing conditions for children covered by the policy. But it does not have to sell to somebody with a pre-existing condition. And the insurer could increase premiums to cover the additional cost.”

Secretary Sebelius immediately fired back with a letter to Karen Ignagni, head of AHIP, the insurance industry’s main lobbying arm. The letter made clear the administration’s intention to issue regulations to enforce both the spirit and letter of the new law, including covering children with pre-existing conditions and providing both access to plans and benefits. And today, it seems the insurance industry relented:

In a letter to Health and Human Services Secretary Kathleen Sebelius, the industry’s top lobbyist said insurers will accept new regulations to dispel uncertainty over a much-publicized guarantee that children with medical problems can get coverage starting this year.

"Health plans recognize the significant hardship that a family faces when they are unable to obtain coverage for a child with a pre-existing condition," Karen Ignagni, president of America’s Health Insurance Plans, said in a letter to Sebelius. Ignagni said that the industry will "fully comply" with the regulations, expected within weeks.

It remains to be seen exactly how this particular battle will play out. While insurance companies say they’ll comply with regulations to issue policies and provide benefits to children with pre-existing conditions, there is no talk about the cost of such policies. Still, for families currently unable to get coverage for their sick children at any price, even this modest change in practices will be a relief, though the bigger changes – including the subsidies to make insurance not only accessible but affordable – don’t go into effect until 2014.

This is the first of what will be many battles with the insurance companies over regulation. The administration and the new regulatory structures put into place by health reform won the first skirmish. But there’s no doubt that insurance companies will throw many obstacles in our way as we move towards guaranteed health care for all. We’ll have to keep fighting them and their army of lawyers and lobbyists as health reform is implemented and improved upon in the years to come.

It’s still true that if the insurance companies win, we lose.

(also posted at the NOW! blog)

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Jason Rosenbaum

Jason Rosenbaum

Writer, musician, activist. Currently consulting for Bill Halter for U.S. Senate and a fellow at the New Organizing Institute.