Insurance underwriting sounds like a universal process in which a company studies your health, lifestyle, finances, and personal history before deciding whether to insure you and what premium to charge.
That description may fit some insurance products. It does not accurately describe ACA-compliant major medical health insurance in the United States.
For Marketplace coverage, insurers cannot reject you or raise your premium because you have diabetes, cancer, asthma, another pre-existing condition, or an expensive claims history. Medical underwriting still matters elsewhere, however, including certain Medigap applications, short-term health insurance, and some supplemental, disability, long-term care, or life insurance products.
So before worrying about what an underwriter might discover, I would identify what kind of insurance is actually being underwritten and which rules apply to it. The same medical history can be irrelevant to one application and extremely important to another.
Underwriting Does Not Work the Same Way Across Health Coverage
Underwriting is essentially the process an insurer uses to decide whether and on what terms it can take on a particular risk.
But federal law has substantially restricted that process in comprehensive individual health insurance.
For ACA Marketplace coverage, insurers are limited in the factors they can use when setting premiums. Current Marketplace premium rules identify five permitted considerations: age, location, tobacco use where allowed, whether coverage is for an individual or family, and the plan category selected. Health status, medical history, and sex cannot be used to increase the premium.
That means a person applying for a Marketplace plan after cancer treatment does not go through traditional medical underwriting to see whether the insurer “accepts the risk.”
The insurer must offer qualifying coverage under the applicable enrollment rules.
Compare that with certain short-term policies. The NAIC's current short-term insurance guidance notes that these plans are often medically underwritten, may review health history when determining eligibility and pricing, and may exclude pre-existing conditions.
Those are fundamentally different insurance transactions.
Before asking what an underwriter will consider, ask whether the insurer is legally allowed to medically underwrite the coverage at all.
The 7 Factors That Can Change an Underwriting Outcome
1. The Type of Insurance You Are Applying For
This is the factor I would put ahead of every medical question.
An ACA Marketplace health plan generally cannot medically underwrite you.
A Medigap company may be able to use medical underwriting in some circumstances.
A short-term policy may review medical history.
Hospital indemnity, critical illness, disability income, long-term care, and life insurance can operate under still different underwriting rules.
Even products sitting side by side on an employee-benefits screen may not follow the same standards.
Imagine Dana is enrolling in three types of coverage:
- Her employer's comprehensive major medical plan
- Optional critical illness insurance
- Supplemental life insurance above the employer-paid amount
It would be a mistake to assume that because her medical plan cannot reject her for hypertension, neither of the optional products can ask health questions.
The policy type determines the underwriting rulebook.
That is why phrases such as “health insurance underwriting” need context. Comprehensive major medical insurance and a supplemental cash-benefit policy are not interchangeable.
2. Your Health History, When Medical Underwriting Is Allowed
Medical history remains one of the most important underwriting factors for products that are permitted to consider it.
Depending on the product and applicable law, an insurer may ask about:
- Diagnosed conditions
- Previous surgeries
- Hospitalizations
- Prescription medications
- Ongoing treatment
- Pending diagnostic tests
- Recent symptoms
- Previous recommendations for treatment
The insurer may use that information to decide whether the applicant satisfies its underwriting requirements.
Possible outcomes can include approval, a different premium where permitted, additional review, postponement, or denial. Certain products may also contain exclusions or waiting periods when law and policy terms permit them.
Short-term insurance is an important health-related example because consumers can mistake it for comprehensive major medical coverage.
A low premium may partly reflect the fact that the insurer has more freedom to screen applicants or exclude medical risks that an ACA-compliant plan must accept.
Medical history works very differently with ACA coverage. Your diabetes, arthritis, previous heart attack, depression, cancer history, or other condition generally cannot be used to determine whether the Marketplace insurer will cover you.
3. Age
Age can influence insurance pricing even when health status cannot.
For ACA individual and small-group coverage, federal rules permit age-based premium variation within established limits. Marketplace premiums for older adults can generally be up to three times those charged to younger adults, subject to applicable state rules.
Age may also affect other health-related products in different ways.
Medigap insurers, for example, can use different pricing methodologies depending on the policy and state:
- Community-rated
- Issue-age-rated
- Attained-age-rated
Age can therefore influence either the initial Medigap premium or how premiums change later, depending on the rating method.
This is different from medical underwriting.
A premium being higher because the applicant is older does not necessarily mean an insurer examined that person's medical records and decided they were unhealthy.
Keeping rating factors and medical underwriting factors separate makes insurance decisions much easier to understand.
A premium difference is not proof that an insurer judged one applicant to be less healthy. Age, geography, tobacco rules, and plan design can change prices without medical underwriting.
4. Tobacco Use
Tobacco use is another unusual example because federal ACA rules specifically allow it to affect premiums even though medical history generally cannot.
Marketplace insurers can potentially charge tobacco users more, subject to federal and state limitations. States can restrict or prohibit the tobacco surcharge, so the effect is not identical everywhere.
This means two applicants of the same age living in the same rating area and choosing the same plan could potentially see different premiums based on tobacco status where the surcharge is used.
Again, I would not interpret this as traditional medical underwriting.
The insurer is using a permitted rating factor rather than studying whether one person's smoking has already caused heart or lung disease.
Other medically underwritten products can ask more detailed questions about tobacco or nicotine use and may use their own definitions. Cigarettes, cigars, vaping, nicotine replacement, and other products may not be treated identically by every insurer.
Answer the application exactly as written rather than assuming your personal definition of “smoker” matches the insurer's.
5. Where You Live and the State Rules That Apply
Geography can influence insurance in two separate ways.
First, location itself affects ACA health insurance premiums. Healthcare costs, provider prices, local competition, and rating areas can contribute to significant premium differences between regions.
Second, state insurance law can determine how much underwriting is allowed.
Medigap provides an excellent example.
Under federal rules, your six-month Medigap Open Enrollment Period begins when you are 65 or older and enrolled in Part B. During that protected period, Medicare explains that insurers generally cannot use medical underwriting to reject you or charge more because of pre-existing health problems. Outside protected enrollment or guaranteed-issue situations, Medigap underwriting rules can become much less favorable.
But states can provide stronger protections.
New York, for example, requires Medigap insurers to accept applications throughout the year and prohibits them from making premium distinctions because of health status, claims experience, or medical condition. The state's current Medigap consumer protections illustrate how dramatically state law can alter what would otherwise be a federal underwriting issue.
Someone researching Medigap in Florida should therefore not assume that advice written for someone in New York applies to them.
6. When You Apply and Whether You Have a Guaranteed-Issue Right
Timing sometimes matters more than health.
Medigap is the clearest example.
During the federal Medigap Open Enrollment Period, the applicant receives valuable protections from medical underwriting. Certain events can also create guaranteed-issue rights, such as losing specified coverage under circumstances recognized by Medicare rules.
Outside those windows, an insurer may be able to ask medical questions and use the answers when determining whether to issue a policy, unless state law gives the applicant additional rights.
Consider Richard, who has Original Medicare and is thinking about Medigap.
If he applies during his protected enrollment period, his history of heart disease generally cannot be used to deny the policy.
If he waits several years and then tries to buy Medigap without a federal guaranteed-issue right, that same medical history may become relevant under the rules in his state.
His diagnosis did not change.
The timing did.
This is one reason I would be particularly careful before dropping Medigap coverage or switching from Original Medicare with Medigap to Medicare Advantage. Returning later does not necessarily recreate the same Medigap purchasing rights.
7. The Accuracy and Completeness of the Application
Where medical underwriting is permitted, the application itself matters enormously.
An insurer may ask about diagnoses, prescription drugs, procedures, physicians, dates of treatment, or pending medical evaluations.
I would answer exactly what is asked and avoid guessing where possible.
That does not mean volunteering a lifetime medical autobiography in response to a narrowly written question. It means providing complete and accurate information within the scope of the application.
If you cannot remember whether a procedure occurred three or four years ago, check available records rather than inventing a date.
Insurers can use automated systems, prescription histories, medical records, and other legally permissible information depending on the product and authorization involved. A contradiction between an application and verified records can create delays or other complications.
Keep a copy of what you submit.
That becomes especially useful if the insurer asks follow-up questions or if there is later disagreement about what information was disclosed.
Several Factors From Traditional Underwriting Advice Do Not Belong in ACA Plan Shopping
This is where the original “underwriting checklist” found in many insurance articles can mislead health insurance shoppers.
Credit score is not one of the factors HealthCare.gov lists as permissible for determining an ACA Marketplace premium.
Neither is your driving record.
Your occupation does not allow an ACA Marketplace insurer to raise your individual premium because your job seems dangerous.
Your sex cannot be used to charge you more for the same Marketplace plan.
And although family medical history can matter enormously to your doctor, genetic information receives its own federal protections. HHS explains that the Genetic Information Nondiscrimination Act provides genetic-information protections against using genetic information for health-coverage underwriting.
Those protections have limits outside health insurance. GINA does not provide the same underwriting protection for life, disability, or long-term care insurance.
That difference is another reason to identify the product before assuming a particular personal detail is either relevant or protected.
The same piece of personal information can be prohibited in one insurance decision and legally significant in another. The product and the law determine the difference.
What Automated Underwriting Changes, and What It Does Not
Technology has made underwriting faster.
Insurers can use automated decision systems, electronic health information, prescription data, predictive models, and other approved sources to evaluate applications that once required lengthy manual review.
That can turn a process that previously took weeks into one that produces an initial decision much faster.
But technology does not erase consumer protections.
An algorithm used by a Marketplace insurer does not suddenly gain permission to price someone's comprehensive ACA health insurance according to cancer history because the decision happened automatically.
The same legal restrictions apply to the data and factors insurers are permitted to use.
For medically underwritten products, automation can make accuracy on the application even more important because inconsistencies may be identified quickly.
When an insurer requests authorization to obtain medical or other information, read what you are authorizing rather than treating the disclosure as routine paperwork.
A Higher Premium Does Not Always Mean You Were “Rated Up”
Suppose two people compare health insurance and discover that one pays much more.
It is tempting to assume the insurer judged one applicant riskier.
With ACA coverage, there may be a much simpler explanation.
They could:
- Be different ages
- Live in different rating areas
- Choose different metal categories
- Enroll different numbers of family members
- Have different tobacco-rating treatment
- Receive different premium tax credits based on household circumstances
An underwriting explanation is unnecessary.
The same care is useful with Medigap. Premium differences can result from pricing methodology, age, location, household discounts, insurer rate changes, and state rules in addition to any medical underwriting that may legally apply.
When a quote changes, ask why before assuming the reason.
What to Do if Medical Underwriting Applies
If you discover that the policy really does use medical underwriting, I would slow the enrollment process down rather than trying to “optimize” the application.
Read the questions carefully.
Gather medication and treatment information.
Understand whether approval is guaranteed or conditional.
Find out whether the insurer can decline the application, increase the premium, impose a waiting period, or exclude conditions under applicable law.
And most importantly, compare the product with coverage that does not expose you to the same underwriting risk.
For someone shopping temporary health coverage, that may mean checking ACA Marketplace eligibility before accepting a short-term policy with medical exclusions.
For someone considering a Medigap change, it may mean checking guaranteed-issue rights and state rules before cancelling the existing policy.
The underwriting decision should not be viewed separately from the alternatives available.
The Quote Check!
Before worrying about how an insurer will underwrite an application, I would check these five details:
- Check the product first: ACA major medical insurance, Medigap, short-term insurance, and supplemental policies can follow completely different underwriting rules.
- Check whether health history is legally relevant: Do not assume a medical questionnaire is part of every health insurance application or that every insurer can price based on existing conditions.
- Check the timing: Medigap open enrollment and guaranteed-issue rights can determine whether your health history may be used.
- Check your state's protections: State law can provide stronger underwriting rights than the federal minimum, particularly for products such as Medigap.
- Check every application answer: When underwriting is permitted, keep accurate records of health questions, disclosures, supporting documents, and the application you submitted.
Know the Rules Before You Worry About the Risk Score
Insurance underwriting is still an important part of many insurance markets, but health coverage deserves a more precise explanation than “the insurer looks at your health and decides how risky you are.”
For ACA-compliant major medical coverage, federal law sharply limits that approach. Medical history and pre-existing conditions generally cannot determine whether you receive coverage or what premium the Marketplace insurer charges you.
For Medigap outside protected enrollment periods, short-term coverage, and certain supplemental products, underwriting can matter much more.
I would therefore start every underwriting question with the policy type, enrollment rights, and state rules. Only after those are clear does it make sense to ask which personal factors the insurer can consider.
The application tells the insurer about you. Understanding the underwriting rules tells you how much of that information the insurer is actually allowed to use.
Theo Calder