About Medical Underwriting

In health insurance, medical underwriting involves the use of health-related information when deciding if an individual is eligible for a coverage, which doesn’t much apply anymore that the Affordable Care Act has made it illegal to increase rates or decline an applicant. The individual’s information is used to determine whether coverage is offered or denied to the applicant, and how much the premium will cost.

There are two methods of underwriting that are used most frequently: moratorium and full medical underwriting. Moratorium underwriting is simplified, whereas full medical is a thorough break down of eligibility information.

To initiate the process of underwriting, the applicants will be asked about pre-existing conditions by the insurance company. Usually this is done for individual or family health plans.




Underwriting was done by a health insurance company primarily with the intention of suggesting that an individual get coverage prior to becoming ill, pregnant, or in need of medical care for other reasons. It was a way to encourage people to buy insurance before they get stuck in a scenario that the health insurance company may not pay for, such as a pre-existing condition.

When individuals decided to wait to get health insurance once they had an illness, it was referred to as “adverse selection”. Those who choose to get insurance after they are diagnosed with a condition create high utilization. In order to accommodate insured individuals who will be using their insurance more frequently, insurers must increase premiums to pay for medical costs. Higher premiums cause individuals without pre-existing conditions less interested in buying insurance, and therefore insurers feel the high utilization group needs regulation. This is where underwriting came in.

Now, the individual mandate is in place to encourage people to buy coverage. Instead of being declined or rated up, they have to buy coverage before March of each year in order to avoid a penalty tax. Everyone is eligible for coverage, however. Under the ACA, no insurer can increase an individual’s premium just because they are sick, and underwriting is limited to tobacco use and age to determine premium rates.


Underwriting in Action

Those in favor of underwriting claim that its purpose is to keep premium costs down. Those against it feel it places a barrier between those who need health care (for conditions that are lesser in scale and can be treated) and the care they need.

Qualifying illnesses that were denied insurance included a variety of conditions. These could range anywhere from cancer and heart disease, to being 20 pounds under or overweight and having acne. The wide range of pre-existing conditions has denied insurance to almost 5 million Americans. Under Obamacare, the underwriting rules of health insurance companies cannot stand in the way of affording or obtaining coverage due to a condition.