Insurance Discrimination On the Basis Of Health Status

Actuarial underwriting or discrimination based on an individual's health status is a business feature of the voluntary private insurance market. The term "discrimination" in this paper is not intended to convey the concept of unfair treatment, but rather how the insurance industry differentiates among individuals in designing and administering health insurance and employee health benefit products.

Discrimination can occur at the point of enrollment, coverage design, or decisions regarding scope of coverage. Several major federal laws aimed at regulating insurance discrimination based on health status focus at the point of enrollment. However, because of multiple exceptions and loopholes, these laws offer relatively limited protections. 

This paper provides a brief overview of discrimination practices, the federal law, and both interim and long-term federal reform options to manage discriminatory practices in the insurance and employee health benefit markets.

The paper concludes that Congress has limited the use of actuarial techniques that exclude persons from group insurance altogether. However, Congress has only modestly tackled risk management techniques linked to the actual content and administration of coverage. The use of discriminatory practices based on health status to limit coverage is especially apparent in the individual insurance market. If the federal government wishes to move in the direction of sharing health risks more broadly, next steps will include creating larger risk-pooling groups and curbing the ability of insurers to limit adequate coverage based on health status.

Keywords: Policy reform ideas, Access, Delivery systems, Legal issues/reforms, State models for national reforms, Administrative cost/structure, Cost containment, Cost-sharing, Plan competition, Reinsurance, Risk adjustment, Market reform ideas, Insurance exchange, Public plans, Role of Medicare/Medicaid