Pre-Existing Conditions, Health Insurance Cost and Access

Introduction: Insurance, Risk, and Pre-Existing Conditions

The insurance industry is an industry built upon risk analysis. Sometimes an insurer's risk calculations can create unfair conditions for the insured, even though such a calculated approach is necessary to sustain the industry as a whole. Consider, for example, the field of car insurance. Based on demographic characteristics, a young male driver will often pay a higher premium than someone outside those high-risk categories. Even if a teenage boy is a careful driver, the insurance company has the right to discriminate against him based on perceived risk, as determined by actuarial tables. Similarly, health insurance companies can — and must — have the right to make comparable risk assessments, including denying coverage or increasing premiums for individuals with pre-existing conditions.

A pre-existing condition is a health condition or illness that an individual had before the first day of coverage under a new plan. "Because a person with a pre-existing condition can cost an insurance company millions," it is often in an insurer's self-interest to exclude those with potentially costly medical expenses (Preexisting conditions, 2010, How Stuff Works, p. 1). The costs of covering these individuals must be balanced against those of healthier enrollees for the health insurance company to remain solvent.

HIPAA Protections and Existing Safeguards

Protections already exist to help those with costly medical expenses find insurance. In reviewing the debate over pre-existing conditions, it is important to remember that on July 1, 1997, Congress passed the Health Insurance Portability and Accountability Act (HIPAA), which limited the maximum length of time a pre-existing condition exclusion can be applied in a group plan. "There are even ways in which you can reduce or eliminate this exclusion period altogether. Under the HIPAA guidelines, the maximum amount of time that you have to wait in order to get coverage for your pre-existing condition cannot exceed 12 months, or 18 months for late enrollees" (Preexisting conditions, 2010, How Stuff Works, p. 2).

Additionally, if an individual can demonstrate uninterrupted coverage under a prior plan, "this insurance coverage can be credited toward any pre-existing condition exclusion" (Preexisting conditions, 2010, How Stuff Works, p. 2). In other words, someone with diabetes who had the condition covered under a former employer's plan can have the necessary treatments covered under a new plan, provided there is no gap in time between the two policies.

This reasonable policy acts as an incentive for individuals to maintain continuous health insurance coverage, even after losing it through an employer, and to avoid a gap in coverage. In doing so, even healthy individuals are encouraged not to become a costly drain on the system by relying solely on emergency care services when an unforeseen health event occurs.

Group Insurance as an Alternative Recourse

There is also the option of group insurance plans, which are generally more likely to cover individuals with pre-existing conditions. "Group health plans have the luxury of numbers, so the insurance company can handle the costs incurred by a person with a pre-existing condition" (Preexisting conditions, 2010, How Stuff Works, p. 3). Even freelancers and independent business owners can form associations to buy into collective plans, such as the Freelancers Union — a national organization made up of independent contractors who purchase insurance together as a collective. The Union charges a small administrative fee for membership.

There are, in other words, recourses available to Americans who do not receive insurance through an employer. However, by removing insurers' ability to discriminate in selecting whom to cover, buying insurance — and insurance premiums overall — will inevitably increase. If insurers are forced to sell coverage to everyone at any time, many people will buy insurance only when they actually need medical care. As one source explains, "this raises the cost of insurance for everyone else, in particular those who are responsible enough to buy insurance before they need it; they end up paying even higher premiums. And the more expensive the insurance, the less likely people will buy it before they need it" (The truth about health insurance, 2009, The Wall Street Journal).

Conclusion: The Reality Behind the Rhetoric

The argument for eliminating discrimination based upon pre-existing conditions is largely an emotional one: there is the looming specter of the individual with cancer who is unable to obtain health insurance. However, because of current HIPAA regulations, such an individual is more often a figure of rhetoric than reality. Recourses do exist for the self-employed and uninsured, such as finding coverage through a group plan like the Freelancers Union. The reality is that when the ranks of the insured ill outweigh those of the well, insurance premiums rise to prohibitive levels.

The statistics regarding states that have experimented with mandated coverage — so-called "guaranteed issue" — are instructive. New York, New Jersey, and Massachusetts "have the three most expensive individual insurance markets among all 50 states, with premiums roughly two to three times higher than the rest of the country" (The truth about health insurance, 2009, The Wall Street Journal). These figures underscore the broader economic reality: eliminating insurers' right to assess risk does not make health care more accessible — it makes insurance more expensive for everyone, and ultimately drives the healthiest and most financially vulnerable consumers out of the market entirely.