In 2014, the Patient Protection And Affordable Care Act will mandate that everyone have health insurance, and that all policies be guaranteed issue. Medical underwriting, denials and exclusions based on medical history will be a memory. But until then, individual health insurance will continue to be medically underwritten, which is the main reason why the premiums are lower than similar policies in the group market.
Medical underwriting starts with the application, which involves an extensive list of health and lifestyle questions. If an insurance company needs more information, they can call the applicant to discuss a particular issue, or order medical records for complete details. However, the latter is costly, and is not done as a routine part of every application for individual health insurance. If it were, perhaps policy rescissions would no longer be an issue.
The concept of rescission definitely generates public ire. Although there are only a few years of medical underwriting left, maybe we should start looking for a more proactive solution to underwriting health insurance applications that would end the need for rescissions.
Most health insurance companies that we work with in Colorado use information provided during the application process for underwriting purposes, and issue or decline coverage based on that information. But at a later date, if the policy holder starts to incur costly claims, the insurance company can go back and do an extensive review of the medical records from before the person applied for coverage (this is still the case following the passage of health care reform, although rescission can only occur in cases of fraud or material misrepresentation). But what if all health insurance applications were subject to the extensive review at the time of application?
This would involve obtaining medical records on every applicant, rather than relying largely on data provided on the application. It could also involve parameds, much like the exams required when a person applies for a life insurance policy (generally a blood draw, urine test, blood pressure, height, and weight measurement). Extensive underwriting at the time of application could eliminate the need for rescissions, but it would admittedly be a costly and time consuming process. Insurance companies would likely have to either charge an application fee, or work the cost of underwriting into the premiums. One bonus to thorough up-front underwriting would be that insurance companies would probably throw themselves behind the streamlining and digitalizing of all medical records, in order to expedite the process of underwriting, and also to curb the expense involved.
One way or another, my guess is that if all individual health insurance policies had to be thoroughly underwritten at the time of application, health insurance carriers would figure out a way to make the process as efficient as possible. And the happy result would be that if people were approved for coverage, they could rest assured that there would be no possibility of rescission in their future. It’s likely that thorough underwriting would result in more people being declined for coverage, but at least those people would then have the option of applying for coverage through a high risk pool like Cover Colorado. Better to find out that you have to seek another health insurance option now, rather than waiting until you’re in the middle of a medical crisis and finding your coverage has been rescinded.
Any thoughts? Would you be willing to pay a little more, either as an application fee or in the form of slightly higher premiums, to know that rescission would never be a possibility? Would you be open to increased scrutiny on the front end in order to avoid it at a later date, if and when you were to become seriously ill?
