Emergency responders administer CPR to an unknown patient on a stretcher as law enforcement officials stand nearby at the emergency receiving area of Baylor University Medical Center, early Friday, July 8, 2016, in Dallas. (AP Photo/Tony Gutierrez)

Pre-Existing Conditions – The ABCs

Within the healthcare legislation battle, both political parties practice deception regarding pre-existing conditions. Whether it is via deceptive terminology or facts and percentages, neither party seems to make any effort to be transparent to the public.

There are actually two issues within the pre-existing conundrum;

  1. Pre-Existing Conditions: Health issues that pre-exist the purchase of a health care policy
  2. Community Rating: Legislation that forces insurance firms to offer similarly priced premiums to those with pre-existing conditions as those without.

It is important to note there are basically two types of insurance types. Those with “Group Healthcare” and those with “Individual Healthcare”

It is also very important to understand insurance companies do not want policies with pre-existing conditions. The for-profit insurance companies must make a profit, the non-profit ones cannot lose money. Healthcare insurance firms almost always lose money on pre-existing  policies. 

Any politician that makes statements about pre-existing conditions and community rating without bifurcating these two groups might be making deceptive statements. Group healthcare policies rarely if ever distinguish between those with pre-existing conditions and those without, whether in pricing or in coverage terms. If you hear a politician say something like “The fact is, most people with pre-existing conditions have community rating already.” The statement is only true because the vast majority of Americans purchase some sort of group healthcare insurance.

The group of people most effected by this, are those with pre-existing healthcare issues who want to purchase individual healthcare policies. Think contract employees, small business employees, single entity Accountants, Lawyers, etc.

Bear in mind, regardless of what they say, insurance firms do not want to give healthcare policies to those with pre-existing conditions. They simply cannot charge enough money to make a profit. Additionally, the administrative work supporting these accounts is far more intense.

You won’t hear, “hey..here’s the deal: We’re going to lose money-lots of money on these accounts. We just don’t want them.”

What you will hear is:

 “It’s not fair to force us to accept these accounts when they can sign up at the last minute once they find out they have a healthcare issue.”

This is a solvable issue. Not only is it solvable, the percentage of people who sign up at the last minute once they find out they have a healthcare issue is very very small. Legislation can be written whereby if you attempt to sign up for a healthcare policy with a healthcare issue which is less than 90 days old, then you have to purchase insurance without that pre-existing condition being covered for an agreed upon period of time. Say 4-5 month. Then you can double the deductible for a period of another 4-6 months as a penalty for trying to game the system. Something like that would be considered fair by everyone.

There is another issue, and this is one that always sneaks up on people. Politicians pass legislation forcing insurance firms to provide pre-existing conditions coverage,  along with some language about community rating. What they don’t tell you is the percentage of annual premium increase allowed. While it might sound great for a person to afford a policy for a year or two, any percentage increase over what is normal, will almost always result in financial hardship. Whether it is individual policies, or “risk pools”, the important question to ask is

“What percentage raise can you apply to my premiums annually?”

In the late 90s Texas passed legislation about pre-existing conditions. All the politicians took a victory lap. What they didn’t tell anyone was the insurance firms were allowed to raise each individual policy by a maximum of 30% each year. This financial burden on top of all of the other cost normal to those with healthcare issues became prohibitive to many.

What seems to escape many people without pre-existing healthcare issues is the overall cost of those conditions outside of insurance. Children that need therapy, see the doctor regularly, require minor surgeries, require medication just to have a decent day. Not to mention clothes, shoes, etc. It often takes most, if not all of a paycheck just make ends meet. If its a decent paycheck. Those on the lower end of the financial scale suffer hurt every day, every week, every month. That last week of the month when bill are due can be a terror all of it’s own.

Ben Stein was on Fox News today saying the same thing I have thought for some time. We are moving toward a single payer system. Whether that is the right thing for America can be debated. It seems to be where we are as a people. We will not allow our citizens to be without healthcare any longer. The politician that loses track of that sentiment will face their constituents at their own peril.

This is really a healthcare issue. Not an insurance issue. Throughout the arc of history, healthcare has not been “for-profit”. Profitable healthcare is a relatively new dynamic to the world. Which is why the standard capitalism arguments fall on many many deaf ears. Over time, people might come to the conclusion a civil society can’t live with the “capitalism push me – pull you dynamic” of profitability within a service we take for granted like any other utility.



About the author

Wm. P. Fitzhenry

5th generation Texan, 2nd generation reformed Presbyterian, a twin and a serial entrepreneur.

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