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Pre-existing conditions, ratings and exclusions

Posted Dec 17 2009 10:57am

There seems to be a lack of understanding about the difference between the terms exclusion and rating for pre-existing conditions. So let’s clear it up.

Pre-existing conditions in today’s terms

  • Insurers may deny individual coverage based upon any pre-existing condition, and not only coverage for the condition itself, but anything they deem to be related to that condition that arises later on.
  • If person has been uninsured for more than 6 months and is hired by an employer with group health insurance, the employer’s insurer may exclude that person’s pre-existing condition from coverage for as much as a year.
  • Once that 12-month waiting period is satisfied (and again, this only applies to group health insurance plans provided by an employer) the insurer will cover the condition, but also ‘rate‘ the policy; that is, charge the employer more than the standard rate for all employees because some employees have a pre-existing condition.

Right now, today, insurance is not available to anyone with a pre-existing condition at all, unless they are hired by an employer, wait 12 months, and their employer isn’t priced out of the market altogether by a pre-existing condition.

Pre-existing conditions if health care reform passes

  • No individual may be denied insurance due to a pre-existing condition, whether in the individual market or group markets.
  • Insurers will have the right to charge 1.5 times the basic rate to smokers and up to 3 times the basic rate for age.

This is the change: There is no exclusion for a pre-existing condition. The insurer is limited as to the amount that can be charged for the policy overall to a multiple of the basic rate.

Wait, I thought the President said pre-existing conditions would be gone with health care reform?

This seems to be the disconnect. There appears to be some objection to the idea of rating higher-risk insureds, and that is being blended into a message that pre-existing conditions are still an issue in the Senate reform bill.

Not so much. There are two ways to approach the cost to cover everyone without regard to their health or lifestyle. The first is to take the whole pool, spread out all the costs and divvy it up equally without regard to age, health, or lifestyle. A single payer system would do it this way. The problem with that approach if you’re a 20-something is that you might not be all that thrilled to be paying for the costs of those 50-somethings in the pool.

The second approach is to “rate” the pool according to some objective criteria. Cover everyone, but charge more to groups that represent higher risk to the group as a whole. This is how the Senate bill approached the issue of costs.

Discrimination is an access issue, not a cost issue

Shutting the door in someone’s face and telling them they need not apply because they were sick once is discrimination. Opening the door and welcoming them in with a higher ticket price is not discrimination when the ticket cost represents their share of the cost of maintaining the pool.

It’s false to suggest, as some have, that ratings represent discrimination. For individuals with pre-existing conditions, it is a question of whether they put everything they have at risk, including their health, because they cannot afford to get decent health care on their own. Opening the door and allowing them to get something they cannot have right now ends discriminatory access.

Costs are a different question. We first have to establish that we value sick people at least as much as well ones. Then we can look at costs and whether ratings make sense or not.

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