Can an Insurance Company Deny Coverage for Pre-Existing Health Conditions?
A pre-existing condition is a medical disorder present before an individual applies for health insurance. Most people with pre-existing conditions can get individual health insurance but at higher rates. Those with serious conditions, however, such as cancer, HIV or multiple sclerosis, usually face denial. Insurance companies penalize applicants with pre-existing conditions since they present more risk. As of 2011, the law allows them to reject or raise the premiums (mark up) of those with pre-existing conditions.
Risk
Health insurance, like other forms of insurance, depends on risk. The youngest and healthiest applicants pose the least risk, and they get the most affordable and comprehensive plans. Accepted applicants with pre-existing conditions often must agree to riders before their coverage begins. Riders exempt insurance companies from covering treatments related to the pre-existing condition for a specific period, which is usually six to 18 months.
Medical Underwriting
Medical underwriting is act of scrutinizing an applicant's medical records to determine his level of risk. Medical underwriters look at the applicant's age, lifestyle, BMI and doctors' and hospital records. They reject or set higher premiums for those with pre-existing conditions to account for the money that the company will likely pay in claims.
Proponents of medical underwriting claim that it thwarts adverse selection -- the practice of waiting untill illness to get health insurance. Critics, however, argue that it is responsible for the high percentage of uninsured Americans.
The 2010 Health Care Bill
The 2010 health care reform bill changed many insurance practices, especially those involving medical underwriting. Effective September 2010, insurance companies cannot deny coverage to young children because of pre-existing conditions. In 2014, insurance companies may no longer reject anyone with a pre-existing condition, and all Americans must have health insurance.
Alternatives
Many alternatives exist for those with pre-existing conditions. Entering an employer-based group plan is the most popular alternative. Federal law prohibits group plans from discriminating against those with pre-existing conditions; unlike individual plans, group plans have no medical underwriting. Entering a state high-risk pool is another alternative. The 2010 health care bill mandates that each state set up a pool. Although the premiums for state high-risk pools can exceed $1,000, some states provide subsidies to low-income residents.
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