Health Insurance 101
In the health insurance industry, it’s routine to get calls from potential clients who are confused about the laws and regulations surrounding HIPAA, medical underwriting, rate increases, pre-existing condition exclusions, group vs. individual health insurance, etc. The system is complex, and urban legends abound (“but isn’t it illegal for a health insurance company to be able to decline someone?”). It would seem that the more educated people are about how our health insurance system works, the better equipped they are to protect themselves and their families. Obviously we need some changes in our health insurance and health care systems. But we also need to give people more information about health insurance – and insurance in general.
I’d love to see a class about insurance being taught to all American high schoolers as a requirement for graduation. The curriculum could be designed by state insurance commissioners – no marketing or propaganda from agents or health insurance carriers. We talk to clients in Colorado on a regular basis who aren’t aware that individual health insurance is medically underwritten. Since this is the case in 45 states, it’s not something you want to be finding out after you’ve already quite your job and lost your group benefits. Or after you’re already pregnant. People need to understand how policy rescissions work, what underwriting means, and that scruples and integrity vary widely from one agent to the next, and from one health insurance carrier to the next. An “intro to insurance” class would be a good start.
Louise:
In regards to rate increases, I assume Colorado has language in individual policies that says, to the effect, that a person cannot be singled out for rate increases; rather, rates can be increased only for a class of insureds.
I am curious if “class” is defined in Colorado.
To my knowledge, it is not defined in Texas.
In fact, in Texas, and many other states, insurers typically close a class block once a new policy form is issued. Thus, with no new entrants, premiums tend to increase faster, for there is no “new blood” entering the pool. The healthy participants can usually get a significant discount by applying to a new insurer, or even the same insurer under another policy form.
Thus, long-term clientele is discouraged in the individual market.
Does this happen in Colorado?
Don Levit
Don,
Rates in Colorado have to be raised for an entire class, but classes can vary with age and zipcode. So everyone in a specific age band, living in the same area, will get the same rate increase. So across the state, rate increases can vary quite a bit even within one health insurance company.
Louise:
Thanks for your reply.
Let’s say an individual has health insurance with Blue Cross in Colorado, and has kept his policy for 5 years.
May it be wise for this person to prove his health once again, and as a new customer, be able to get a significant discount, even with Blue Cross?
Don Levit
Don,
It’s interesting that you use the example of Blue Cross – Anthem is one of the only companies I know of in Colorado where the rates are the same for new and existing clients in the same age bracket and zip code, and in the six years that we’ve been in the health insurance industry in Colorado, Blue Cross has not closed any of their plans to new applicants. There are a few other carriers that charge the same rate to new and existing clients, but they do “sunset” plans, and if you end up on a plan that has closed to new applicants, you’ll probably be better off switching to another carrier if you are healthy enough to do so. Our clients do tend to have us shop around for better options every few years. Sometimes there’s no better option, but often there is.
Louise:
Would you say that Anthem is one of the best carriers for those who want relatively long-term coverage?
If so, is there a point in which if someone is unable to requalify, he is paying a significantly higher premium than one just applying for coverage at his attained age?
Don Levit
Don – yes, I would say that Anthem is a good option for people who plan to have their insurance for a long time. I have never seen an instance where Anthem’s rates anywhere in Colorado are higher for existing clients than for new clients of the same age, in the same location.
Louise:
That is good news.
It is encouraging to know there is an insurer that treats its older customers just as well as its newer customers.
The only drawback I can think of is that it may be hard for Anthem to get new customers, in that its rates may be significantly higher – sort of like whole life v. term.
Don Levit
Happily, they’re still one of our most popular insurers, and their prices stay competitive for several products from year to year.