The theory of the moral hazard hypothesis goes something like this: moral hazard occurs when a party isolated (set-off) from risk may react differently than it would if it were fully exposed to the risk. In the case of risk aversion, insurers are stepping up concerns that families will seek coverage under new reform laws only after their children fall ill. They contend that the ability to keep this from happening will contain costs and premium increases.

The White House seemed to be waiting for the line to be drawn in the sand before responding to this potential reform-killing measure — that is, until Insurance essentially threatened ending children-only plans under reform altogether in some states.

Some state insurance commissioners expressed concern that, without an open enrollment period that was widely communicated, people might wait until their children got sick to enroll them in coverage, causing plans’ costs to increase. And we were concerned when last week, some indicated that insurance companies would choose to stop offering policies for children rather than cover kids with pre-existing conditions.

HHS has since clarified the administration’s position on this matter issuing an advisory stating the formation of open enrollment periods, outside of which coverage will not be provided. Now, the distinction between children with congenital and pre-existing conditions and those with acquired, high-cost diagnoses is more clearly defined — for the purposes of the insurance companies, that is. | LINK

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