As part of the underwriting process, an individual's health information may be used in making two decisions: whether to offer or deny coverage and what premium rate to set for the policy.
If allowed, the criteria used should be objective, clearly related to the likely cost of providing coverage, practical to administer, consistent with applicable law, and designed to protect the long-term viability of the insurance system.
[5] Critics of medical underwriting believe that it unfairly prevents people with relatively minor and treatable pre-existing conditions from obtaining health insurance.
[8] One large industry survey, from 2004, found that roughly 13% of those who applied for individual health insurance were denied coverage after undergoing medical underwriting.
However, the study did not distinguish between consumers who were quoted increased rates by medical underwriting and those who qualified for standard or preferred premiums.
[12] The 2001 Commonwealth Fund study found that a majority of adults reported that it was at least somewhat difficult to find an affordable health insurance policy.
States that have outlawed medical underwriting include New York, New Jersey, Maine, Massachusetts, and Vermont, which also have the highest premiums for individual health insurance.
There had been instances in which insurers increased premiums at annual renewals based on an individual's claim history or changes in their health status.
[19][20] However, in most cases, an insurer's ability to "re-underwrite" an existing guaranteed renewable policy is limited by contract provisions and the Affordable Care Act (previously by state law).
The American Academy of Actuaries performed a study of the proposed solutions for the National Association of Insurance Commissioners and modeled the likely impact of each.
Moratorium underwriting is an alternative method of health insurance which primarily allows for applicants to receive cover without disclosing their entire medical history.
This then allows the insurer to provide the applicants with lists of specific exclusions based on their disclosed pre-existing medical conditions.