Personal Health Insurance Underwriting Standards

Underwriting Standards and Outcomes

Generally, personal health insurance underwriting standards have focused on two behavioral reasons – smoking and obesity – that are the underlying causes for as much as seventy percent of our healthcare problems. Heavy tobacco users and those over the height / weight limits will usually be rated up or, in the extremes, declined.

Issues that can impact the underwriting decisions are the plan benefits you select, cost of any medications you use, frequency of office visits, potential surgery, the progression of any disease (acute versus chronic and whether degenerative) and applicable state of residence requirements.

There are essentially four underwriting standards:

• Preferred (discounted from standard rates): proper height/weight, never smoked, no claims history or pre-existing conditions;

• Standard (at normal rates): proper height/weight, no smoking within one year, no excess claims history, no major pre-existing conditions;

• Preferred Smoker (rated up 5-10 percent): within height/weight limits, not more than nine cigarettes or one cigar per day, no excess claims history, no major pre-existing conditions;

• Tobacco User or Over Weight (rated up 25 percent or more, maybe exclusion riders): tobacco use in excess of half a pack of cigarettes per day or over weight by 25 to 30 pounds over height/weight limits, no excess claims history, no major pre-existing conditions.

There are several possible underwriting outcomes, as follows:

• Preferred or Standard Policy Offer: No problems, offer at normal or discounted rates;

• Request For Additional Information: Request for medical records, lab reports or additional forms or information needed to complete underwriting process;

• Counter Offer: An offer from underwriters that may involve an excluded condition, a limited coverage or a higher rating for some specific condition or issue, subject to acceptance by applicant;

• Declined: Applicant declined or rejected, usually due to some unacceptable pre-existing condition. In some cases, a Limited Benefit Plan may be an option;

• Postponement: Applicant would be declined based on current conditions, but may be acceptable absent that condition, so re-apply in the future, if improvement.