The Details of Health Insurance Underwriting

Health insurance underwriting is the process that health insurance companies use to encourage people with lower health care costs to join the risk pool by offering lower premiums and more thorough coverage than those who are already sick. Underwriting is more common with individual health insurance policies.

Why Health Insurance Companies Underwrite

Underwriting discourages adverse selection, in which people who seek health insurance tend to be in poorer health, and have higher than average health care costs. By gathering and verifying information, health insurance companies can assess premiums based on a full picture of their anticipated future benefit costs.

The Health Insurance Underwriting Process

Health insurance underwriting starts with the application, which includes questions about health history and lifestyle. In addition to the application information, underwriters may order copies of an applicant’s health records for up to the past ten years. Underwriters consider health history, age, gender and certain lifestyle considerations including tobacco or alcohol use.

Results of Underwriting

If underwriting finds unfavorable risks such as a pre-existing condition, the policy may be rated up, requiring higher premiums to reflect the higher anticipated benefit costs. The insurance company may also apply exclusions or limitations to coverage based on pre-existing conditions. Underwriting may prompt an insurance company to reject coverage for applicants considered an unacceptably high risk.

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