Some health insurance plans use a practice called "underwriting" to
analyze the amount of money a person might cost the insurance
company under an insurance policy. The insurance company then
determines who is an "acceptable risk." They decide whether to sell
a policy and the price of the policy, based on the type of risk they
are trying to attract or avoid.
Underwriting is more common in individual insurance plans than in
group health plans.
How does insurance work? The basic concept of insurance is
to spread the cost of health care over a large group. Usually, only
a few insured people in the group have large health care costs, so
the system spreads the costs broadly. Insurance companies see these
costs as "losses," because it is money that they have to pay out. In
group health insurance, healthy people effectively subsidize people
who need more health care.
Insurance plans that use underwriting may request and review your
health history. They may ask for a physical exam and medical tests.
Some insurance plans limit coverage for a pre-existing
condition. However, federal laws called HIPAA and COBRA may
protect you from this limitation. If you have been diagnosed with or
received treatment for an illness or condition within the last year.
State laws may
somewhat limit insurers' ability to underwrite. For example,
your state may prohibit insurers from refusing to sell insurance
based on genetics or sexual orientation. Some states effectively ban
discriminatory pricing by requiring what is called "community
rating," under which insurers set prices by geographic area, not by
individual factors such as age or health history.
People who support
underwriting say:
- Insurance prices must
reflect risk. Insurance plans are products sold in the open
market, like lawn mowers and refrigerators.
- Insurers can offer
different types of products according to individual needs and
the market will set a fair price. The costs of individual
policies cannot be spread across a large group.
- Insurance is regulated
and there are laws that discourage unfair or abusive practices.
People who oppose
underwriting say:
- We are at the mercy of
health insurance companies, who have hidden rules and superior
resources.
- Health insurance is
essential to good health and insurers should sell to anyone.
They should not be allowed to only sell insurance to cheaper,
low-risk people.
- Health insurance is not
just a product to be bought and sold in the marketplace.
People's lives depend on their health insurance coverage.
- Everyone probably has
some kind of pre-existing condition. No one can ever fully
insure against all risks. Anyone can become disabled or
seriously ill in an instant.
Here's how you can deal with underwriting:
Know what your rights are. Check out "A Consumer Guide for
Getting and Keeping Health Insurance" and click on your state to see
what kind of underwriting your state allows or does not allow.
Ask questions, but
don't expect the insurance company to be forthcoming about their
rules. Ask how the company came up with the price that they are
quoting you.
Read the policy carefully.
Don't trust brochures and ads, but be sure to check out the fine
print. Get quotes
in your area for health insurance.
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