The Impact Of Medical Underwriting On Premiums

The issue of pre-existing conditions and medical underwriting in the individual health insurance market has been a major point of contention in the health care reform debate this year.  Hank Stern of InsureBlog has weighed in on the topic, and it’s an issue that I think deserves another look.  Hank points out that in the small group market, health insurers are required (for the most part) to accept all applicants without much in the way of medical underwriting.  People who haven’t had continuous coverage will have waiting periods applied to pre-existing conditions, but they can’t be declined completely, and once the waiting period is over, even the pre-existing conditions are covered.  Here in Colorado, small groups used to be subject to some underwriting in order to determine the premium – groups could qualify for up to a 25% discount or a 10% price increase based on the overall health of the members.  But that disappeared with HB 1355.

The individual market is different.  Medical underwriting is part of the application process, and applicants can be declined, offered coverage at a higher price, or offered coverage with pre-existing condition exclusions.  The trade off is that the policies are less expensive than they would be in the group market.

Jay and I have an HSA-qualified policy for our family.  It has a $5000 deductible (one deductible for all three of us together).  Other than a small amount of preventive care, nothing is covered before the deductible is met, so our coverage only comes into play if we have a relatively large claim.  But it only costs $288/month for our family.  It also allows us to put pre-tax money into an HSA and save up for the possibility of having to meet our deductible one day (or for retirement, if we don’t end up needing the money for medical expenses).

Jay and I are both full-time employees of our corporation, and could thus qualify as a group of two with any small group carrier in the state.  For comparison’s sake, I got a quote for us for an Anthem Blue Cross Blue Shield HSA-qualified policy.  Jay and I would each have our own policy as a group of two, with our son added to one of the policies.  I found an HSA qualified small group policy that would cost $578/month for our group.  But the deductibles would end up being a total of $15,000 for our family on that policy.  The policy would be twice as expensive as what we have now, and the out of pocket exposure would be three times as much as what we have now.  And that’s a quote from a very competitive carrier.

Incidentally, if all three of us had medical conditions that allowed us to qualify for Cover Colorado, we could pay a total of $550/month for three separate HSA qualified policies, each with a $2000 deductible.  This is another example of guaranteed issue coverage, and the increased price when compared with our current policy reflects the added cost that comes when health insurance picks up the tab for pre-existing conditions.

That’s what happens when policies have to be guaranteed issue (and include state mandated coverage like maternity on all policies).  Of course, the current small group market doesn’t include any sort of mandate requiring groups to purchase health insurance.  Proponents of a shift away from medical underwriting on individual health insurance policies also tend to back a measure that would require everyone to carry health insurance.  That would help spread the cost of care across a larger population, and would likely help to contain the price increase that we would see if medical underwriting were to cease.  But my guess is that we would still see a rather dramatic increase in premiums.  This highlights the importance of getting to the root of the issue of health care costs, and how to contain them at source.  Health insurance pays the costs, and unless we can lower those costs, it’s unlikely that we’ll be able to lower the cost of health insurance.

I found Hank’s post in the Cavalcade of Risk, hosted down under this week by Andrew at Oz Risk.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for,, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.


  1. Louise:
    Your last statement about costs is right on the mark.
    I find it ironic that people think if we can just get the for-profit motivation from private insurers out of the equation, we will be on our way to fixing health care.

    Whether for-profit or not for profit, the players need to be paid reasonably.
    Even not-for profit organizations are allowed to pay their employees reasonably, and still maintain thie tax-exempt status.
    Don Levit

  2. When you compare the costs of care in Costa Rica, it is about 1/5 of the United States. This has to do with the cost of care, which has less to do with insurance companies than people might think. The charges from physicians and hospitals and the costs of drugs is dramatically higher in the US, and this is something that needs to be addressed. Also, if hospitals & doctors were required to furnish a basic price list of common procedures, it would allow those who are uninsured, or under-insured to price shop, and would introduce the concept of competition into a market that currently does not have this element.

  3. Olaf Gundersen says

    I find it unbelievable that Americans in general does not seem to understand that the private market system is the root of the whole problem with the American health care system. The only way you are going to fix your broken health care system is by getting rid of the private market insurance system altogether, and let the government take over where the market clearly does not deliver.

    The numbers speaks for themselves. The US spends by far the largest proportion of their economy on health care than any other country in the entire world. All other developed countries have a government run universal health care program, and these countries only spend a fraction of what the US spends on health care relative to the size of their economy.

    But by all means, just keep on being the world example of how not to organize a health care system. At least you give the rest of us all the political ammunition we need to keep our privatization horny rightists off our health care systems. Though I must say it is funny it does not seem to work like that the other way around.

  4. robert binford says

    Three cheers for Olaf. Sadly in the U.S. the notion of individual rights and profit seem to rule the day, dispite the impact. I believe we are becoming a nation of sociopaths.

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