About 86 percent of U.S. citizens get health insurance through an employer or government plan, according to the Health Insurance Resource Center. The remainder who seek insurance through an individual policy may be surprised to find out how the process differs from simply signing up for insurance through work. Individuals and families must go through an underwriting process before an insurance company approves an application.
Definition
When you submit an application for health insurance for yourself or your whole family, the insurance company uses the underwriting process to determine whether you present an acceptable risk. The company uses information about your and your family's medical history to estimate the likely costs of your future health care. Based on their assessment, they choose to offer or deny coverage and determine some details of your policy.
Purpose
When insurance companies cover large businesses, the risks associated with individuals are minimized because of the large pool of people receiving coverage. Thus underwriting is not necessary, as the individual health histories of employees do not affect the policies and rates the employer can offer. For smaller businesses, insurance companies may use underwriting to establish premium levels for the whole group, although employees all get the same policy choices at the same cost. But when insurance companies consider insuring individuals or families, they take into account the relevant medical history to make sure that providing coverage makes financial sense. They are unwilling to take on a large financial risk for an applicant whose health care costs are likely to greatly exceed the amount paid in premiums.
Process
As part of the insurance application process you will fill out a health history questionnaire for yourself and each member of your family who will be included on the policy. The application usually includes questions about conditions and symptoms each applicant has had in the past and about any treatments obtained. You may also be expected to provide contact information for all the health care providers you have used within a certain time period (the past ten years is common). It may take weeks or even months for the underwriter to review all your medical information and determine how to proceed with your application, particularly if it requests medical records from your doctors or contacts you for additional details about your history.
Outcomes
The underwriter uses the information you provide to assess the risk associated with your health care coverage and to assign you to a group with other people and families who have similar histories. This group, known as a risk class, determines whether you will be offered coverage and what your monthly premium will be. Based on your family's health history the company may add a rider to your policy, which incorporates additional terms not contained in your main policy. This is most commonly done to exclude coverage for certain conditions for a certain period of time or completely.
Considerations
In filling out the health history for yourself and your family, be as thorough as possible. You may need to refer to your records; it can be difficult to remember every condition and doctor's visit you or a family member has had over a period of years. If you remember something after submitting the application that you neglected to include, tell the insurance company. This may add to the time required for underwriting, but it is important that you do it anyway. Should your insurance company learn later about a condition or treatment you had that was not disclosed on your application, it may refuse coverage or even cancel your policy. Because the underwriting process for individual health insurance can be time consuming, it is wise not to cancel existing insurance until the process is complete.
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