March 27, 2010 -- Houston Tracy, a 12-day-old boy, has already survived a rare birth defect, a feeding tube and open heart surgery. Now his family is waiting to see how the battle with an insurance company will fare.

Last week, Houston's parents found out that the term "pre-existing condition" can apply the moment someone is born.

"When he came out, he made one little cry and he didn't really cry much," said Houston's father, Doug Tracy, 39, of Crowley, Texas.

Tracy cut the umbilical cord and watched the hospital staff clean his son. But before his wife Kim Tracy, 36, could touch their son doctors got worried. "We could tell there was something wrong by the way they [the doctors] were acting," Doug Tracy said.

Houston's skin wasn't turning a shade of pink like most newborns because, somehow, his blood wasn't getting enough oxygen. Doctors rushed Houston, with Tracy riding by his side, in an ambulance to Cook Children's Medical Center in Fort Worth, Texas.

Within hours the Tracy family would learn their son was born with a heart condition called d-transposition of the great arteries, meaning the aorta and pulmonary artery are transposed where they should meet the heart. Doctors wanted to operate within days to save his life.

"In Houston's case he would not have survived had he not gotten the care," said Dr. Steve Muyskens, pediatric cardiologist at Cook Children's Medical Center, who treated Houston. "Most children with this [would] have a demise within days to months in life."

Muyskens explained that with the aorta and pulmonary artery switched the system creates two separate pools of blood -- a small amount that travels from the heart to the lungs and back to the heart and another pool of blood that travels from the body to the heart and back out without ever reaching the lungs for oxygen.

"The red blood just circles on one side and blue blood circles on the other," Muyskens said. All of Houston's organs, including his heart, would soon die without red blood.

Even if doctors could stabilize a child with Houston's heart condition they would only have a short window to operate.

One Surgery Could Save a Life

"The Gold standard is surgery -- arterial switch procedure," said Dr. Daphne Hsu, division chief of pediatric cardiology at Montefiore Medical Center in New York. "The procedure has to be done before the child is 1 month old, because then the heart starts to change and adjust to the circulation, and the pressure in the heart drops."

Houston was born on Monday, March 15. By Friday that week, doctors operated successfully. Muyskens expects Houston will have a normal life, and likely won't even need medications.

"Everybody's nickednamed him Rocky around there because he's a fighter," said Tracy.

But by March 24, the Tracy family formally heard their son was denied health insurance.

"We don't have health coverage on ourselves because it's too expensive these days and because of the economy," Doug Tracy said. The couple are small business owners and would have to buy individual policies, which they have for their other children Cooper, 4, and Jewel, 11.

Doug Tracy said the family had no idea there was something wrong with Houston before he was born.

"Prenatal, every doctor visit was perfect, his heart beat was fine," he said. But Tracy said he called Blue Cross and Blue Shield of Texas twice in preparation of Houston's birth, and he asked if they could get a policy on his son before he was born.

"They said we can't do that because he wasn't born yet, but as soon as the baby's born go online and fill an application out," he said. Doug Tracy applied for Houston's insurance March 18, and the first month's premium of $267 was charged to his credit card, he said.

"Wednesday, the 24, is when I got a letter of decline -- they declined it the day after the [health insurance] bill was signed," Doug Tracy said.

Yet the provision in the health insurance reform act that prohibits health insurance companies from denying coverage to children with a pre-existing condition will only take effect six months after the bill was signed into law.

Family Searches for Insurance Coverage

Blue Cross and Blue Shield of Texas declined a phone interview with ABCNews.com about procedures to enroll newborns and their policies in light of the new health care reform act.

But the company was willing to e-mail a prepared statement.

"We share the public's concern for this child and for uninsured children across our state. As you may know, federal privacy laws prohibit me from releasing any information about members or potential members of Blue Cross and Blue Shield of Texas [BCBSTX]," Margaret Jarvis, senior manager of media and public relations at Blue Cross and Blue Shield of Texas, wrote in an e-mail.

Jarvis said Blue Cross and Blue Shield of Texas would automatically cover newborns of parents who already had a policy with them for 31 days. After that time parents could opt to include their baby on their plan whether or not the child had health issues.

"For children whose parents are not BCBSTX members, who want child-only coverage, we offer individual policies, beginning at the age of 60 days," wrote Jarvis. "BCBSTX has spoken with the father of this child, and we are exploring all available alternative coverage options."

Doug Tracy said his family has found an alternative route to get his child coverage through the Texas Health Insurance Risk Pool, and the policy will only cost $277 a month -- $10 more than the premium on the policy he tried to take out for his son. However, he said he's confused since he will still have to apply through Blue Cross and Blue Shield of Texas if he goes through the Texas Health Insurance Risk Pool.

"I don't hate them [Blue Cross and Blue Shield], they've done well for my other two kids," Doug Tracy said. "I just want them to do the right thing."