Coverage Denied: How the Current Health
Insurance System Leaves Millions Behind

Meena Seshamani, MD, PhD

"Pre-Existing Conditions" Affect Millions of Americans

A large proportion of Americans have health conditions that insurance companies can qualify as “pre-existing conditions.” A pre-existing condition is a one that existed before someone applies for or enrolls in a new health insurance policy. It can be something as prevalent as heart disease—which affects one in three adults [1] or something as life-changing as cancer, which affects 11 million Americans [2].

But a pre-existing condition does not have to be a serious disease like cancer or heart disease. Even relatively minor conditions like hay fever, asthma, or previous sports injuries can trigger high premiums or denials of coverage [3].

Unattainable Health Coverage

Insurance discrimination based on pre-existing conditions makes adequate health insurance unavailable to millions of Americans. In 45 states across the country, insurance companies can discriminate against people based on their pre-existing conditions when they try to purchase health insurance directly from insurance companies in the individual insurance market [4]. Insurers can deny them coverage, charge higher premiums, and/or refuse to cover that particular medical condition.

A recent national survey estimated that 12.6 million non-elderly adults [5]—36% of those who tried to purchase health insurance directly from an insurance company in the individual insurance market—were in fact discriminated against because of a pre-existing condition in the previous three years [6]. In another survey, one in 10 people with cancer said they could not obtain health coverage, and six percent said they lost their coverage, because of being diagnosed with the disease [7].

It is still legal in nine states for insurers to reject applicants who are survivors of domestic violence, citing the history of domestic violence as a pre-existing condition [8]. Even when offering coverage, insurers can exclude whole categories of illnesses related to a pre-existing condition. For example, someone with a pre-existing condition of hay fever could have any respiratory system disease—such as bronchitis or pneumonia—excluded from coverage [3].

Losing Coverage When You Need It Most

Thousands of Americans also lose health insurance each year through a practice called rescission. When a person is diagnosed with an expensive condition such as cancer, some insurance companies review his/her initial health status questionnaire. In most states' individual insurance market, insurance companies can retroactively cancel the entire policy if any condition was missed—even if the medical condition is unrelated, and even if the person was not aware of the condition at the time. Coverage can also be revoked for all members of a family, even if only one family member failed to disclose a medical condition [9].

A recent Congressional investigation into this practice found nearly 20,000 rescissions from three large insurers over five years, saving them $300 million in medical claims [9]—$300 million that instead had to come out of the pockets of people who thought they were insured, or became bad debt for health care providers. At least one insurance company has been found to evaluate employee performance based in part on the amount of money an employee saved the company through rescissions [9]. Simply put, these insurance company employees are encouraged to revoke sick people’s health coverage.

The Need for a Solution

High-risk pools, which have been used by states to cover the “medically uninsurable,” do not work. Thirty-five states offer a high-risk pool for people who have been denied coverage in the individual insurance market or otherwise cannot obtain insurance [10]. However, high-risk pools generally charge significantly higher rates than they charge for a healthy individual in the individual insurance market [11]. meaning that only relatively high-income people can afford the coverage. One study estimated that only 8% of the uninsurable population is able to enroll in high-risk pools, mainly because of high premiums [12].

Benefits through a high-risk pool are also not guaranteed. Some state high-risk pools have annual caps on enrollment, or limit eligibility only to people who had prior group health coverage in the preceding 63 days. And one state high-risk pool has been closed to new beneficiaries since 1991 [10].

All high-risk pools also impose pre-existing condition exclusions for six months to one year, during which time care for the very condition that made someone uninsurable is not covered [10].

Health Insurance Reform Will Provide Stability and Security for All Americans

Under health insurance reform, insurance companies will be prohibited from refusing coverage because of someone’s medical history or health risk. Insurance companies will be required to renew any policy as long as the policyholder pays their premium in full. Insurance companies will not be allowed to refuse renewal because someone became sick.
And insurance companies will be prohibited from dropping or watering down insurance coverage for those who are or become ill.

References

  1. American Heart Association. Heart Disease and Stroke Statistics 2009 Update-at-a-Glance.
  2. National Cancer Institute. Cancer Query System: Cancer Prevalence Database.
  3. Pollitz K, Sorian R. How Accessible is Individual Health Insurance for Consumers in Less than Perfect Health? Kaiser Family Foundation, June 2001.
  4. Kaiser State Health Facts.
  5. Commonwealth Fund Biennial Health Insurance Survey, 2007.
  6. Doty MM, Collins SR, Nicholson JL et al. Failure to Protect: Why the Individual Insurance Market is not a Viable Option for Most US Families. The Commonwealth Fund, July 2009.
  7. USA Today/Kaiser Family Foundation/Harvard School of Public Health. National Survey of Households Affected by Cancer. November 2006.
  8. National Women’s Law Center. Nowhere to Turn: How the Individual Health Insurance Market Fails Women, 2008.
  9. Waxman H and Barton J. Memorandum to members and staff of the Subcommittee on Oversight and Investigations: Supplemental information regarding the individual health insurance market. June 16, 2009.
  10. Pollitz K. State High-Risk Health Insurance Pools. April 2009.
  11. National Association of State Comprehensive Health Insurance Plans. Comprehensive Health Insurance for High-Risk Individuals: A State-by-State Analysis: Twenty-Second Edition, 2008/2009, 2008.
  12. Frakt AB, Pizer SD, Wrobel MV. High-risk pools for uninsurable individuals: Recent growth, future prospects. Health Care Financing Review Winter 2004-2005; 26(2): 73-87.

Dr. Sechamani is Director of Policy Analysis, HHS Office of Health Reform. This article was originally published in slightly different form on HealthReform.gov

This article was posted on August 14, 2009.

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