The U.S. Department of Health and Human Services says that in 2004, average medical expenditures totaled slightly less than $7,000 per person. This makes health insurance a necessity for most families. But what happens if you or another member of your family is identified as high risk? Affording, or even getting approved for, health insurance becomes a serious problem.
Defining High Risk
Virginia-based insurance executive Courtney Rogers spends his day advising his staff on how to rate potential clients. According to Courtney, insurance is a risk-oriented business. Insurers calculate the likelihood that a potential client will cost them money and charge premiums based on that likelihood. In the case of health insurance, high-risk classifications are either health based or behavior based.
Health-Based Risk
Health-based risk comes from the medical history of a client. Someone with a disability or chronic illness needs regular check-ups, continuing treatment, medications and sometimes durable equipment. All of this represents a greater expense for the insurance company. Similarly, some acute diseases put the patient at increased risk for later illness, even if he has completely recovered. A winning battle with cancer, for example, is statistically linked with a later occurrences of cancer.
Mitigating Health-Based Risk
The best way to mitigate health-based risk is to find an insurance company that doesn't consider pre-existing conditions, according to Rogers. Because of federal regulations, health maintenance organizations often do not raise premiums for clients with pre-existing conditions. To determine whether a particular HMO does or does not consider pre-existing conditions, ask the insurance broker directly. Note that some states also have laws that forbid insurance companies from considering pre-existing conditions if a new client was insured at the time of moving to a new company.
Behavioral Risk
Some insurers also weigh behavioral risk. The most common risk behaviors are drug use, criminal history, hazardous occupation and hazardous hobbies, Rodgers says. Because these behaviors can increase the likelihood of accidents and, in some cases, exposure to illness, people who display this kind of risk are more likely to cost insurance companies money than those who don't.
Mitigating Behavioral Risk
By signing a document that says the insurance company doesn't have to cover costs arising from risky behavior, a client can qualify for regular health insurance rates, according to the Bisys Educational Service exam preparation book for health insurance certification. Note that insurance law does this automatically in most states for injuries arising from illegal behavior, including drug use and drunken driving.
Raising Deductibles
A deductible is an amount of money the insured is expected to pay out of pocket before his insurance starts covering the expense. For example, a policy with a $100 deductible would pay $200 of a $300 claim, $900 of a $1,000 claim and none of a $100 claim. Whether the risk comes from medical or behavioral classification, accepting a higher deductible will reduce your rates. Although this plan makes the premiums more affordable, it can make medical care a hardship.
Health-Care Reform Act
The 2010 Health Care Reform Act includes provisions intended to make health insurance more affordable for high-risk people. As of September 2010, insurance companies are no longer allowed to deny children insurance because of pre-existing conditions. By 2014, insurers will no longer be able to let pre-existing conditions affect approval or premium rates for adults or children. The act also includes a plan to establish a high-risk pool, spreading the responsibility to insure high-risk people among all insurance companies.
References
- "Exam Cram: Life and Health"; BiSys Education; 2008
- Courtney Rogers, Insurance Executive, Richmond, VA
- CBS News: Health Care Reform Act Summary
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