Why is group coverage guarantee issue, while individual coverage is underwritten?

In 1996 Congress passed several significant health legislation bills.  The Kennedy-Kassenbaum bill was the most significant change in the U.S. Healthcare system since Medicare was introduced in the 1960’s.   The KK bill mandated, amongst other things, that all group insurance would be guarantee to issue regardless of health conditions.  Prior to this legislation, even group insurance was not guarantee to issue.  The legislation also provided that each State must provide avenues to insure guaranteed availability of insurance, at a reasonable cost, to all individuals seeking coverage.    This legislation allowed each State to adopt variable pricing mechanisms and guidelines so that insurance companies were somewhat protected by an anti-selection process.  Over the past 12 years, the original legislation has been modified and enhanced several times to try and meet market needs without driving insurance competition away.  

 

In most States, the premium costs for individual insurance is lower, sometimes significantly, than group coverage.  The myth still exists with many, that somehow group coverage is cheaper.  It’s not.   Group coverage, even for healthy groups, is generally more expensive than individual plans.   Individual insurance carriers are allowed to thoroughly look at applicant’s histories and can turn down applicants. What is no big deal in a group plan can be a significant obstacle with individual plans.   Many individual carriers will decline to offer coverage to 20-35% of applicants.  Many carriers offer plans that can add premium from preferred rates to account for the risk or can exclude conditions from coverage.   Having a good agent who has access to multiple carriers and who asks you a lot of questions about your health and budget are more likely to find the right plan for you.   If you are not insurable, that agent can guide you to your State’s insurance option for high risk individuals.

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