Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Medical underwriting uses gathered facts and figures to help determine the health status of a potential insured individual, as well as helping establish a fair and equitable premium rate
  • All health insurance companies try and assess risk and use all available tools to minimize this for the company
  • There is a desire by some legislators to bring back high-risk pools since there have been limits placed on the ability to reduce risk through coverage denials
  • Honesty and complete disclosure of health history is important to help bring a balance to the health care insurance system
  • The future of medical underwriting includes more technology minded ways of gathering information

Medical underwriting is a large and important task carried out by actuaries within the insurance industry. Their fact gathering allows for a complete picture to be made of anyone that is trying to get health insurance coverage.

Underwriting procedures are used to help minimize fraud but are used far less to cancel policies for reasons that are now against health reform laws. No person can be denied coverage due to having a pre-existing condition, which used to be a huge area of contention between insurers and the insured. Being dishonest about a health history can get your policy canceled, however.

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Medical Underwriting for Health Insurance

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The process of medical underwriting involves the use of statistical data to determine the level of financial risk an insurance company is taking by offering you coverage. In order for insurers to build revenue, payments for medical services need to be as limited as possible.

There was a time that policies could include exclusions, limitations, or individuals could be denied coverage for pre-existing conditions. Health care reform laws have now made the job of medical underwriting increasingly difficult, although there are still ways that these assessments can be used to build pools of insured people that minimize overall risk.

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Risk Management

You might purchase a health insurance policy to avoid paying all of the costs towards health care, but the insurance company offers you this insurance in the hopes that they will not have to pay many claims for your health care. It is a truly symbiotic relationship between the insurer and all healthy clients.

The problem is there are real health issues that people have and treatments can cost a lot of money. Although both enter the business relationship with good thoughts, this can quickly devolve once problems arise.

Risk Managment Tools

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True medical underwriting involves the use of risk assessment tools to help determine the probable outcome financially of offering you an insurance policy. Once the risk is assessed, there are some tools that can be used to lower the overall risk. There are also internal controls that can be used to make sure that all operations are running smooth and efficiently.

A few of these tools are:

  • Accumulated health and environmental data, both for a group and individual risk assessment
  • Wearable devices such as Fitbit that tell the tale on the habits of the insured individuals
  • Preventative service information and management
  • Environmental and behavioral health trends

Technology will continue to be developed that challenges the current thoughts and blurs the lines between providing useful data and crossing the lines of patient privacy.

Right now the developments seem to be heading towards the voluntary use of devices like Fitbit in exchange for lower premium rates, but there may come a time that this type of information gathering becomes a normal part of the risk management scheme.

Health Insurance Pools

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Controlling the costs of health care claims has been a high-stakes business for decades. Initially, states developed high-risk pools to place the more uninsurable candidates into and subsidized the health care costs to provide a lessened impact on the insurance industry. It seemed less cumbersome than having insurers try and stick these individuals in the regular pool of insured people, drastically raising premium rates in some cases.

These high-risk pools were to begin transitioning to Federal control in the year 2013, which did happen with the creation of the Pre-Existing Condition Insurance Program (PCIP). Doing away with the limitations on pre-existing conditions also did away with the need for PCIP plans.

This has been one of the leading complaints in the industry regarding health care reform. These highly uninsurable individuals are now placed within the general pool, making it hard to contain premium costs. This is one factor that is bringing up more debate about restructuring the reforms to include high-risk pools yet again.

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Limits on Limitations

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Medical underwriters are well aware of the fact that their hands are tied when it comes to not being able to limit the annual or lifetime limits for any of the health care reform essential services.

The most that can be done to contain these costs is to offer healthy living incentives, wellness checks to catch problems early and foster a growing relationship with health care providers that paves the way for reduced rates in service.

Health insurers are still able to set annual and lifetime limits for any and all services that are considered essential care. A patient has the right to appeal the decision when health care services have been denied and the insurers have the right to question the validity of treatments and services that have no scientific backing as effective or are outrageously expensive.

Health Care Balance

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Medical underwriting has often been misunderstood and at times taken the blame for the steady rise in medical care costs. The facts are that insurers have sought answers to the rising costs as much as the insured. Both have a vested financial interest in paying the amounts required.

Much of the rising costs have been attributed to the out-of-control rising price of hospital services, pharmaceuticals, and technological advancements. In short, cutting-edge medicine costs a lot of dollars in a free market economy.

The cost associated with most doctor and nurse care costs have remained in reasonable ranges. It is the more advanced treatments and use of hospital technology devices, partnered with often patented medications with no generic substitutes causing the alarming rise in medical care costs.

Health care reform has allowed a window of opportunity for the insurance industry to use their gathered data to try and bring the prices of many services into a more affordable range for all involved.

The Importance of Being Honest

The work of a medical underwriter can root out information that is false, or left purposefully incomplete. These are the two biggest reasons that an insurer can refuse to provide or cancel your current coverage.

Health care reform had made it impossible for you to lose coverage due to pre-existing conditions, which means leaving health information incomplete, or being dishonest about medical history is not necessary. The new health care laws have made it easier for insurers and the insured to work together.

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Challenges of Future Medical Underwriting

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Technological adaptation will be the driving force behind medical underwriting of the future. The field will entail less digging for information or data and more a method of compiling freely available data. Devices and self-administered data collection will allow any insurer to stay on top of situations with the insured in real time.

The job of the actuary will be to gather information that is helpful in an insurer providing more services that potential customers are looking for.

Use of adaptive technology that can help intervene in behavioral and dependency issues and create a sense of community is right around the corner.

This can be mobile programs like smartphone apps. There will be an increased ability to help lower costs from multiple angles. The expected disruptive approach can ultimately be used to benefit the industry as a whole.

Medical underwriting professionals are the individuals that gather the facts needed for making good, informed decisions as an insurer. There has always seemed to be a bit of mystery surrounding the tasks undertaken to set policy premiums and decide who does or does not get coverage.

Health reform laws have limited the ability to deny coverage in some instances, but they are still able to protect insurance companies from fraud and direct misleading information.

The future of medical underwriting, although somewhat changed, will still support the insurance industry through top-notch fact-finding skills. Contact a health insurance expert today if you have any questions about how medical underwriting practices determine your premiums and coverage.

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