Ezra Klein, who blogs on the Washington Post, reports that insurance companies initially tried to weasel out of the requirement to immediately. cover all kids regardless of pre-existing conditions. They agreed that, for kids they actually insured, they could not exclude pre-existing conditions. However, they argued that they were not subject to guarantee issue requirements and that they would not need to offer insurance to sick kids.
Clearly, Congress intended to have all kids covered. The insurers read the law correctly but they would not have been following the spirit of the law. This is irrelevant: the Secretary of Health and Human Services, Kathleen Sebelius, was infuriated and threatened to clarify in regulation that the insurers were subject to guarantee issue. The insurers have folded. If they had been willing to accept a PR disaster, the substantive consequences would not have been terrible, since most such children would be eligible for the Children's Health Insurance Program, the publicly-sponsored kids' insurance program which covers uninsured children. In any case, the insurers would have found it difficult to justify not covering children for obvious reasons - kids are ahead of even the military, small businesses and kittens in terms of public sympathy.
This does highlight the considerable challenge that HHS and other government entities will face in the years to come. It's simply not possible to write a law to cover every contingency - and some folks were already complaining about the 2700-page bill. We clarify a lot of the law in regulations. However, when the exchanges are up and running, a lot more wrinkles will surface at the exact same time. HHS and state agencies will need to be on their collective guard. Consumer representatives will need to hold their governments accountable.