With the establishment of the Affordable Care Act (ACA), consumers could no longer be denied health coverage due to pre-existing conditions. A 2010 Congressional investigation found that the four biggest for-profit health insurers — Aetna, Humana, UnitedHealth Group and WellPoint – denied coverage to more than 651,000 people over a three-year period. In fact, the investigators discovered that 1 out of every 7 consumers with pre-existing conditions was denied coverage.
Investigation uncovers millions denied coverage
The ACA’s provision to allow those with pre-existing conditions to purchase health plans has impacted a major segment of enrollees. Overall, the findings showed that prior to the ACA, about 12.6 million nonelderly adults were denied coverage due to having a pre-existing condition in the previous three years. This represents 36 percent of all consumers who tried to purchase health insurance directly from an insurance company in the individual insurance market.
The results of the investigation, gathered from thousands of pages of insurers’ documents, were revealed in a memo released by former Democratic Congressmen Henry Waxman and Bart Stupak. Waxman was also the Chairman of the House Committee on Energy and Commerce from 2009-2011; he was the ranking member from 2011- 2015, as well. The memo illustrated how these insurers denied coverage based on “an extensive list of medical conditions.” One insurer actually used a list of more than 400 medical diagnoses, including such common conditions as pregnancy, heart disease and diabetes.
The investigators found that since 2007, the number of denials due to pre-existing conditions increased each year; this number outpaced the increases in applications for coverage. Specifically, from 2007-2009, those denied coverage for pre-existing conditions increased by 49 percent. During this period, applications for coverage at the four largest insurers increased by only 16 percent during the same period. Insurers denied coverage to (see table below):
- 172,400 people in 2007
- 221,400 people in 2008
- 257,100 people in 2009
As of 2008, most Americans had health coverage through their employer or Medicare. However, an estimated 15.7 million adults under age 65 received coverage through individual policies; they were the most likely to be denied coverage because of pre-existing conditions. Other consumers were able to purchase plans, but weren’t covered for medical issues that predated enrollment.
Defining pre-existing conditions
Pre-existing conditions are those diagnosed in consumers before they apply for or enroll in a new health insurance plan. According to the Centers for Disease Control (CDC), an estimated 133 million men and women are living with at least one chronic (recurring) condition. These diseases are very common and cause 7 in 10 deaths nationwide each year. Chronic conditions continue to take a massive financial toll on the American healthcare system.
The CDC states that 75 percent of all healthcare expenditures go toward treating these diseases, many of which are preventable. In fact, four common, destructive behaviors are responsible for the majority of chronic disease-related illness, disability and premature death:
- Tobacco use
- Insufficient physical activity
- Poor eating habits
- Excessive alcohol use
Explaining the reasons for insurers’ denial
Prior to the healthcare law, these conditions resulted in potential consumers facing high premiums or being denied coverage. These conditions include major diseases, such as cancer or diabetes, but also minor ones, like asthma or previous sports injuries. Insurers also denied coverage for any related illnesses. For example, having hay fever meant being denied coverage for any related respiratory system disease (i.e., pneumonia, bronchitis). Nine states even denied coverage for survivors of domestic violence.
Another method for denial was through a process called rescission. This involves applicants with expensive conditions, such as cancer, being denied based on their initial health status questionnaire. Insurers retroactively cancelled applicants’ entire policies if any condition was missed. Policies could be cancelled if medical conditions were unrelated, or applicants weren’t aware of the condition at the time. Entire families’ coverage could have been revoked, as well. In total, the Congressional investigation uncovered nearly 20,000 rescissions from three large insurers over five years; these companies saved $300 million in medical claims.
Before the ACA’s start, 35 states offered those consumers denied coverage in the individual insurance market or otherwise unable to obtain insurance a high-risk pool option. This insurance imposed pre-existing condition exclusions for six months to one year; in this time, the actual condition that made someone uninsurable isn’t covered. These insurance options are also typically much more expensive than traditional plans. Some states’ pools had annual caps on enrollment or only enrolled those who had prior group health coverage in the preceding 63 days. Finally, high-risk pool benefits aren’t guaranteed.
The insurers in question have acknowledged these issues. However, they did state that they were doing their best to work within the healthcare system at that time. The insurers emphasized that they had to consider consumers’ health status. And as people were discouraged from buying policies only after they became sick, everyone’s costs increased. In a Wall Street Journal article, Mohit Ghose, a spokesman for Aetna, stated that they “document what many health insurers, including Aetna, have been saying for years – that the individual market needs to be reformed, so we can improve access for all consumers.”
The ACA eliminates the pre-existing provision
The four leading behaviors (tobacco use, insufficient physical activity, poor eating habits and excessive alcohol use) responsible for chronic conditions are common and destructive. But they’re also manageable and preventable, providing Americans have proper healthcare coverage and access to preventive care and treatments. This also has the benefit of driving down healthcare costs.
Under the Obama Administration’s healthcare reform, eliminating the rules calling for denial of coverage due to pre-existing conditions helps to achieve these goals. Previously, health insurers realized that the sicker a potential customer was, or the higher their risk, the worse it was for them to cover these people. But under the ACA, these companies agreed to cover everyone and provide the same essential health benefits. However, those who could afford insurance would have to buy insurance.
The Affordable Care Act prevents consumers from being denied coverage, regardless of their medical history or present state of health. And, their health will not affect the cost, availability or level of their insurance plan. As long as an enrollee pays their policy’s premium in full, they won’t lose their coverage. Beneficiaries can even shop around for policies offering lower out-of-pocket costs, including those for coinsurance, deductibles and copays. Among the benefits of the ACA for those with pre-existing conditions are:
- Insurance companies can no longer deny coverage or charge more for people with pre-existing conditions.
- Insurance companies can no longer deny you for any reason, other than fraud.
- Insurance companies can’t put lifetime or annual dollar limits on Essential Health Benefits (EHBs). These include screenings, preventions and treatments for most life-threatening conditions. EHBs apply to items and services in 10 benefit categories:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices; “habilitative” services help people keep, learn or improve skills and functioning for daily living
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care.
- All plans must cover free wellness and preventive services. This means it’s much quicker and convenient beneficiaries to visit their doctors. And this early detection makes it easier to prevent sickness and receive early treatments to help treat people before it’s too late.
- Subsidies are available for those who make less than 400 percent of the Federal Poverty Level. This helps to make both premium costs and out-of-pocket costs more affordable.
However, the Obama Administration understood that not all consumers would immediately switch over to the new national healthcare system. For customers with pre-existing conditions, this still meant having to wait until January 2014 for coverage. As such, the ACA established a program called the Pre-Existing Condition Insurance Plan (PCIP), which ran until the new healthcare law came into effect in 2014.
PCIP made health insurance available to consumers with pre-existing conditions who’d been denied coverage by private insurance companies. It covered a broad range of health benefits, including primary and specialty care, hospital care and prescription drugs. PCIP didn’t charge higher premiums because of medical conditions and didn’t base eligibility on income. To qualify, enrollees: had to be uninsured for at least six months; had a pre-existing condition or been denied coverage because of a health condition; had to be U.S. citizens or residing here legally.
It’s important to note that while ACA-compliant plans cover pre-existing conditions, short-term plans and “grandfathered” individual health insurance plans don’t. Grandfathered plans, which were sold through individual insurance brokers on or before March 23, 2010, are exempted from the ACA’s rules.
Both grandfathered plans and short-term health insurance can still place limitations on pre-existing conditions. However, consumers can switch over to a Marketplace plan during the Open Enrollment Period (OEP); you’ll immediately get coverage for your pre-existing conditions. The OEP restarts on November 1, 2015, and all Americans must enroll in health insurance or face a tax penalty of $695 per adult for 2016.