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December 31, 2006

Healthy? Just Ask Your Insurer.

The LA Times roars out of the gate this morning with a searing article on insurance industry underwriting and the many insignificant ailments that will lead insurers to simply refuse you any and all coverage.

Jerry Flanagan, an advocate with the Foundation for Consumer and Taxpayer Rights, said it wouldn't take much to be left out of the private-insurance market. "A minor asthma condition or a surgery 10 years ago that requires no further medical care is enough to get you blacklisted forever," he said.

As a result, some people forgo treatment so as not to tarnish their health records. Others withhold information from doctors or ask them to leave details out of their records. For those who are uninsurable, healthcare often is the chief reason they stay in or take a certain job.

Claudine Swartz enjoyed running her own consulting business but had been rejected for individual insurance. After a scare over a benign cyst in her breast, the San Francisco resident closed her business and got a job with the University of California's health system, where she enjoys guaranteed coverage.

The episode made her realize that without insurance, she would have been on the hook for catastrophic expenses if her diagnosis had been more serious.

"I wasn't willing to take that risk," said Swartz, 35. "It's a real problem for people trying to be entrepreneurial and work on their own."[...]

Insurers declined to disclose the underwriting guidelines that lead to rejection or higher premiums. But a review of public records, as well as rejection letters sent to individuals, shows that California carriers turn people away or charge them higher premiums for conditions that range from the catastrophic to the common. Cancer, epilepsy and AIDS make the list, along with breast implants, ear infections, varicose veins and sleep apnea.

Jeffrey Miles, a vice president of the California Assn. of Health Underwriters, a trade group for independent insurance agents, said one of his clients — a 27-year-old woman "in perfect health with absolutely nothing wrong" — was rejected because she had seen a psychologist for three months after breaking up with a boyfriend.

"I call it hangnail underwriting," Miles said. "If a person has taken virtually any medication, they are going to be turned down. If people have had any psychological counseling at any time in recent history, they are going to get turned down."

Swartz, the consultant, said the reason she couldn't get individual coverage was a condition in her records that she may never have actually had. Her physician had diagnosed ulcerative colitis. But after years without additional symptoms, Swartz said, her doctor decided the initial diagnosis was probably wrong.

Consumer advocates say out-of-date, ambiguous and even erroneous medical information can render people uninsurable. Sometimes the reasons can seem absurd. In a letter to an otherwise healthy recent college graduate, for instance, Blue Cross listed among the reasons it denied coverage a past bout of jock itch, "successfully treated with cream."

Community rating -- forcing insurers to insure everyone at the same price, and barring them from rejecting any applicant -- ends this practice. Which is why it's a non-negotiable element of any serious reform plan. But anyway: Happy New Years. My resolution? To keep working towards a better, fairer, more just system.

December 31, 2006 in Insurance | Permalink

Comments

Good resolution. I'd be interested in your thoughts on mixing some incentives for good behavior (not smoking, exercising regularly, things not based on luck, presumably) in with community rating.

Posted by: Sanpete | Dec 31, 2006 3:00:14 PM

I live on Long Island, where school taxes, if what I've seen is any indication, are higher than most other areas of the country. And every year, even people who vote for the budgets, get pissed off as their taxes increase but receive no additional services or actually receive fewer services. Last year, it was worse than I ever remember, which may not reflect reality but still reflects the level to which people are pissed off. The local paper, Newsday, discussed this in detail. One of the findings was that taxes went up to fund pensions and the health care of employees, not because they are receiving superior packages but because costs are just soaring no matter what. So, even if the money is levied through some other state or federal tax, it might make sense to advertise a universal program as a way to reduce local taxes.

Posted by: Brian | Dec 31, 2006 6:34:24 PM

Amen.

Blue Cross sent me a nice letter telling me that I must be "sign, symptom and treatment free" from my condition for 12 months before they would consider my application. I have had it explained to me that this is a simple business decision, which is true enough, but I still find the practice cruel and wrong. I don't think I'm ever really going to get over being bitter for it.

Posted by: Amanda | Dec 31, 2006 6:39:04 PM

After reading through some of the examples of people who were denied coverage, it's a wonder that there are enough candidates who can pass the medical underwriting screen to provide a viable business model.

While I've said before that I support community rating, the downside is that young, healthy people will pay substantially more for health insurance than they would through underwriting. That, opponents say, amounts to a redistribution of income from young, healthy people to older, sicker people. To add insult to injury, according to the opponents, those being subsidized have higher incomes on average than those who are subsidizing. To the extent that there are young, healthy people who think community rating is a good idea from a healthcare financing standpoint even though it would cost them more money personally, it would be helpful if they spoke out and said so.

Posted by: BC | Dec 31, 2006 7:08:45 PM

Count us in as some of the many who are unable to get individual insurance in California. We tried a couple of years ago, and were denied. Luckily, neither the spouse nor I really wants to be self-employed.

However, when we look ahead, the health insurance situation in California is one of many reasons why we do not plan to spend the rest of our lives here.

Posted by: fiat lux | Dec 31, 2006 8:42:54 PM

Go, Ezra, and thank you.

While I'm fortunately insured through my employer, I have many friends and family members who are stuck in a job they dislike because pre-existing health conditions mean they're uninsurable elsewhere, or who are self-employed and have chosen to go without insurance due to the high costs. It's just wrong, and it's time for it to be changed.

Thank you for educating us readers on this topic (I now feel knowledgeable enough about it to try to enlighten others), and I sincerely wish you a healthy new year.

Posted by: Jumada | Dec 31, 2006 11:42:24 PM

As a result, some people forgo treatment so as not to tarnish their health records. Others withhold information from doctors or ask them to leave details out of their records.

'Doctor choice' in the US is often about the ability to choose a doctor who'll massage the official records. Never mind that this may affect treatment in cases where an individual isn't able to tell emergency staff or unfamiliar physicians what a particular record means.

It's quite something when the pre-existing condition rules apply when one switches jobs but not insurers: going from one PPO to another is enough to do the trick.

it's a wonder that there are enough candidates who can pass the medical underwriting screen to provide a viable business model.

It's through a tacit acceptance that everyone attempts to fudge the records.

Posted by: pseudonymous in nc | Jan 1, 2007 1:07:22 PM

Quoting from BC | Dec 31, 2006 4:08:45 PM:

...the downside [of community rating] is that young, healthy people will pay substantially more for health insurance than they would through underwriting. That, opponents say, amounts to a redistribution of income from young, healthy people to older, sicker people...

Civilization itself is a redistribution of income.

Myopic self-interest and laissez-faire 'free market' economics, which ignores all values except those denominated in bottom-line dollars, are major problems here. Sadly, Friedman was largely successful in his quest to destroy the idea of a 'mixed economy' that acknowledged social values that weren't simply red in tooth and claw.

Posted by: Will | Jan 1, 2007 5:00:37 PM

Or BC, you could also view it as young people effectively pre-paying premiums for services that they are very likely to consume in the future.

My mom took a fall for a silly reason down a steepish hill, breaking her ankle when she did. The ankle was pinned and then the pin later removed in a separate surgery. There was no remaining problem after the pin was removed. However, when my dad retired well before 65, my mom was initially unable to get medical insurance. Fortunately they were eventually able to find and afford a fairly expensive plan that covered everything except her right leg. An accidental broken bone can disqualify you for insurance.

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Posted by: Raymond | Oct 8, 2007 8:07:15 AM

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