INTRODUCTION
The presence of pre-existing medical conditions can significantly impact an individual’s ability to secure life insurance coverage. In this article, we will explore how pre-existing medical conditions affect life insurance, including the types of conditions that are considered pre-existing, how insurers assess risk, and the potential consequences for policyholders.
PRE-EXISTING MEDICAL CONDITIONS: WHAT ARE THEY?
Pre-existing medical conditions refer to any medical condition or illness that an individual has before applying for life insurance. This can include chronic conditions such as diabetes, hypertension, or asthma, as well as previous illnesses or surgeries. A pre-existing condition can be something as common as high blood pressure or allergies, or as serious as cancer, type 2 diabetes, or asthma—chronic health problems that affect a large portion of the population. Insurance companies will find some pre-existing conditions more desirable than others. Private insurance companies and health plans are businesses that are focused on their financial bottom line. It’s in their best interest, therefore, to exclude people with pre-existing conditions (or make the coverage unappealing to them), impose a waiting period before coverage starts, or charge higher premiums and out-of-pocket expenses to cover people with pre-existing conditions since those people are likely to cost the insurer more in claims expenses. In the end, insurance companies are interested in learning how a policyholder is attempting to maintain their own health. Therefore, in the event that a candidate has type 2 diabetes, the agent will look for evidence that the candidate is making a concerted effort to modify their diet and exercise regimen in addition to taking any prescription drugs they may require to maintain blood sugar control. The individual may have less options when it comes to reducing their premium if they have a family history of heart disease in addition to a major cardiac illness that they are currently dealing with. The good news is that as new medical research and procedures continue to enhance patient outcomes and life expectancy, the number of controllable issues will only rise.
THE CONCERNS
Every life insurance company will have a different policy regarding pre-existing conditions, so it can be important to compare reputations and shop about to get the best deal possible in terms of benefits and services. It is common for insurance companies to be the most resistant to serious illnesses like chronic obstructive pulmonary disease or metastasized cancer. However, when it comes to other disorders, such as high blood pressure, high cholesterol, or stroke, insurance companies will consider the severity of the issue, the contributing factors, and the steps taken by the policyholder to manage the condition. Patients with seriously weakened immune systems, however, might still have problems getting permission.
LEGAL PERSPECTIVE
We shall consider the United States of America as case study. The Patient Protection and Affordable Care Act 2010 (ACA) includes a risk adjustment protocol that requires individual/family health plans with healthier enrollees to pay into a pool of money and then payments are made to health plans with sicker members. This helps to mitigate or eliminate insurers’ preference for healthier enrollees.[1] However, because these clauses are unpopular and make it more difficult for consumers to get health insurance, most insurance markets have addressed this issue through a variety of state and federal rules. By the time the ACA was enacted, pre-existing condition exclusions were becoming less common, and underwriting rate increases (with a premium that was 25% or 50% or more higher than the standard rate) were taking their place more frequently.[2] An essential risk adjustment scheme for the individual and family health insurance markets is part of the Affordable Care Act. Funds are essentially moved under this method from health plans with healthier members to those with sicker members. Therefore, even if a health plan with healthier members will have lower claims costs, they will also be required to contribute to the risk adjustment program, which is meant to counteract the benefit of having healthier members.[3]
HOW DO INSURERS ASSESS RISK?
When evaluating an application for life insurance, insurers consider various factors, including:
– Medical history
– Age
– Lifestyle
– Family medical history
Insurers use this information to assess the level of risk associated with providing coverage. Individuals with pre-existing medical conditions are considered higher-risk, as they are more likely to require medical treatment or have a shorter life expectancy.
Most working Americans get health insurance as an employment benefit.
Short-term health plans do not cover pre-existing conditions.[4]
Under this employer’s plan, it is more likely that your health insurance no longer excludes pre-existing health conditions.[5]
There are other kinds of plans that do not cover pre-existing conditions. Medical underwriting, which bases eligibility and/or premiums on medical history, is generally used by plans that are not regulated by government laws and results in the exclusion of coverage for pre-existing medical problems. Some of these plans include health care sharing ministry plans, fixed indemnity plans, and travel medical insurance.
Certain patients with serious pre-existing conditions may have no other option than to use guaranteed acceptance insurance. Regardless of any prior medical issues, individuals between the ages of 50 and 75 can typically access them. Although the prices are usually far higher than those of a regular life insurance policy, there is also no possibility of being turned down.[6] A restricted death benefit will be paid to a person’s family or loved ones to meet necessary costs as long as they continue to pay their premiums. Although the terms of each life insurance policy will vary, the total death benefit is typically equal to the sum of the premiums paid in full plus interest. This kind of coverage has no medical underwriting, thus applications can be accepted in a matter of minutes.
CONSEQUENCES AND SOLUTIONS FOR POLICYHOLDERS
The presence of pre-existing medical conditions can result in:
– Higher premiums
– Policy exclusions or limitations
– Denial of coverage
– Rider clauses (additional fees for coverage of specific conditions)
While pre-existing medical conditions can impact life insurance, there are steps individuals can take:
– Disclose all medical information accurately
– Choose the right policy type (e.g., guaranteed issue or simplified issue)
– Consider working with an insurance broker
– Maintain good health and manage conditions effectively
CONCLUSION
The government keeps making changes to the risk adjustment program to improve its functionality because it is not flawless. However, generally speaking, it does assist to prevent situations where insurers might create their plans to appeal more to healthy consumers than to those with medical issues.
When it comes to how a pre-existing disease impacts benefits, people may see trends quite easily. Some might discover that all of their possible costs are about the same, while others might discover that insurance providers view their condition as much more negotiable. For instance, they might discover that, although three insurance companies approve them for full benefits, four insurance companies reject them full coverage because of type 2 diabetes. Regarding the precise amount that an individual will pay for coverage over time, there are no hard and fast rules. All prospective candidates should understand, nonetheless, that they do have options when it comes to coverage—even if it means accepting their application with a 100% guarantee.
Medical history is no longer a factor in eligibility or cost for the majority of health insurance plans, and pre-existing conditions are often covered from the moment the plan goes into force.
Pre-existing medical conditions play a crucial role in life insurance assessments. Understanding how insurers evaluate risk and the potential consequences can help individuals make informed decisions when applying for coverage. By disclosing medical information accurately and exploring available options, individuals with pre-existing conditions can secure life insurance that meets their needs.
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| UGOCHUKWU N. ONYINYECHI, ESQ.
(Associate, G.M. Ibru& Co.) |
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REFERENCES
- Clarke & Sampson (2024). How Pre-Existing Conditions Affect Life Insurance. Link: https://www.clarkeandsampson.com/resource-center/insurance/how-pre-existing-conditions-affect-life-insurance
- Commonwealth Fund. Centers for Medicare and Medicaid Services. Premium Stabilization Programs.
- Glied S, Jackson A. Access to coverage and care for people with preexisting conditions: How has it changed under the ACA?. Commonwealth Fund.
- Michael Bihari, MD (2023). Understanding Health Insurance Exclusions & Creditable Coverage. Link: https://www.verywellhealth.com/pre-existing-conditions-exclusions-1738633.
- Norris L. ‘So long’ to limits on short-term plans. healthinsurance.org.
[1] Michael Bihari, MD (2023). Understanding Health Insurance Exclusions & Creditable Coverage. Link: https://www.verywellhealth.com/pre-existing-conditions-exclusions-1738633.
[2]Glied S, Jackson A. Access to coverage and care for people with preexisting conditions: How has it changed under the ACA?. Commonwealth Fund.
[3] Commonwealth Fund. Centers for Medicare and Medicaid Services. Premium Stabilization Programs
[4] Norris L. ‘So long’ to limits on short-term plans. healthinsurance.org.
[5] Michael Bihari, MD (2023). Understanding Health Insurance Exclusions & Creditable Coverage. Link: https://www.verywellhealth.com/pre-existing-conditions-exclusions-1738633.
[6] Clarke & Sampson (2024). How Pre-Existing Conditions Affect Life Insurance. Link: https://www.clarkeandsampson.com/resource-center/insurance/how-pre-existing-conditions-affect-life-insurance