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If you're applying for individual insurance or a small-group plan, it will help if you understand the application process.
Applying for an individual health plan
If you apply for insurance on your own or as part of a small group (for example, a small company or a local club), the insurance company takes on more risk than with a large group because there isn't a large pool of healthy people to offset the costs of those who need more care.
To increase the chances your health care won’t cost them more than the premiums you pay, the company will want information on your medical condition. This will help them determine how much to charge you and whether to offer you a policy at all.
This process, called medical underwriting, varies widely — for example, in a few states it's even illegal. Your state insurance department can tell you what's allowed in your area.
Here's an overview of steps in the medical underwriting process:
Assessing the risk
If you are applying for insurance as an individual or part of a small group, you will likely be asked for information on your health status and that of any family members who would be covered. For example:
- Past or current medical conditions
- Any pregnancies, medication use or hospitalizations
- Alcohol, drug or tobacco use
- Whether you have ever been rejected by an insurer
- Your age, since health problems tend to increase as the years pass
- Height and weight, to see if you would pose a risk due to obesity
- Your location, to see if you live in a high-risk area — for example, one that is regularly hit by hurricanes or tornadoes
- Employment information, which can indicate if your occupation is dangerous
- Your driving record, which can indicate if you are prone to accidents
They also may require:
- Blood, urine or saliva samples
- A statement from your doctor regarding your health status
- Medical records from your doctors and from any hospital visits
If you refuse to provide the requested information, the insurer can refuse to offer you a policy (unless state law prohibits it). A good health insurance broker or agent can help you navigate this process.
Verifying your information
To ensure you are telling the truth on your application, many companies consult the MIB Group, a membership association that maintains a database of information about the status of applicants' health. If you have applied for insurance in the past seven years, the MIB may have records on file describing your medical history.
You can ask the MIB to send you your records each year to determine whether they're accurate. There is no charge for this service.
Evaluating pre-existing conditions
When you apply for insurance independently, a pre-existing condition -- a chronic problem or diagnosis that existed before you applied, such as HIV or cancer -- can lead to a higher rate or denial of coverage (unless your state doesn't allow this).
For example, if you have diabetes, the company may offer you a policy that doesn't pay for insulin, covers your diabetes only after a waiting period or increases your premiums.
Note that federal law may offer you some protections and if you are denied coverage, there are other options you can check out.
Calculating your premium
The cost of your policy will probably be tied directly tied to your health status — the younger and healthier you and your family are, the lower the rate.
The insurer will use the information they gather about you to determine whether to charge you the base rate (approved by your state's insurance regulator) for people your age. These base rates are usually available in a chart on the company's website; if not, you can call the company to request the chart. If the company determines that you will likely cost them more than the average person in your age group, they may offer you coverage at a higher price.
Rates can vary based on the benefits each state requires insurance companies to offer. Be sure to check with your state insurance department to see if there are any factors the insurer can't use to determine rates and if there are any rules limiting premiums.
A good agent or broker can give you information on state law, explain a company's rate system, determine whether a bid is reasonable and help you find an insurer who provides quality coverage at reasonable cost.