Definition Monday: Pre-existing Condition

Wikipedia defines a pre-existing condition as a risk with extant causes that is not readily compensated by standard, affordable insurance premiums. Pre-existing condition exclusions by the insurance industry are meant to cope with adverse selection by potential customers.  In English, if when you are applying for coverage and you have a condition that will cost the insurance company more in claims, the insurance company doesn’t want to pay claims for it right away.  This makes sense otherwise we would never have insurance until something went wrong.  It would be like buying car insurance after we have an accident.

So, how are pre-existing conditions handled in the current market and how will they be handled once all the provisions of the Affordable Care Act go into place in 2014?  Currently, Pre-existing condition exclusions are prohibited for HIPAA-eligible individuals (those with 18 months continuous coverage unbroken for more than 63 days and coming from a group health insurance plan).  So this is a non-issue for people who are just changing coverage from one major medical policy to another major medical policy.  If you are not HIPAA-eligible, then you are subject to a “look-back” period to define what the pre-existing conditions are and then a waiting period for coverage for those pre-existing conditions.  In all cases, if the pre-existing condition in not a risk insurance companies want, then they can choose to not insure you (see my definition of Guaranteed Issue from last week).  Also, children 18 and under are not subject to pre-existing exclusions as they have been Guaranteed Issue since September 23, 2010.

In 2014, all major medical policies will change to PPACA compliant policies.  At that time, pre-existing conditions will not be a consideration and will not be excluded for anyone.  This is the case whether the person has had coverage in the last 63 days or not.  The insurance companies do have the option of instituting a waiting period of up to 90 days before coverage goes into effect.

That’s all for the definition for today.  I know this subject can be dry, but it is valuable to understand the basics so when you read about the bigger issues, you can understand these basic concepts that are referenced.

More to come…

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