Pre-existing Condition Clauses: Why do they exist?
March 30, 2013 8:31pm CST
This is a simple FYI on Pre-existing Condition Clauses, why they exist. You can determine for yourself whether you agree with them, and some after reading this may still be against them. That's fine. At least you'll understand the purpose when we're done. Suspend disbelief For the moment pretend we're working together in a company. You, me, and at least 8 other people. But for some reason this company has zero health care insurance. So we are sitting around the lunch room, and someone suggests we start our own health care pool. Our own Employee Health Fund. Funded and operated completely by the employees. Insurance companies are all crooks anyway, and this way there's no CEO collecting million dollar salaries off our Employee Health Fund. Now of course when we first open our Employee Health Fund "EHF", the fund will have zero dollars in it. That's pretty risky, since if anyone has a major problem, we won't have the money to help them. So for the first two years, we're going to have everyone put in $1,000 a month, until the fund has at least $250,000 in cash. Then we'll cut the premiums in half. So that's where we are today. Premiums just went down to $500 a month, and our EHF has $250,000 in it. New Employee A new employee shows up today, and you offer them a chance to join the EHF. They decline. You can't force people to buy your EHF plan, and if they don't want to, they don't have to. So another year goes by, and this employee shows up and says he'd like to join the EHF now. You have him fill out the paperwork, and he sends in his first premium. The following week, he submits a claim for a Kidney Transplant. Cost will run about $270 Thousand dollars over the next year and half (costs vary depending on the state it's done in, but this is average). The EHF is now empty, and premiums have to double instantly to re-fund the EHF. After 24 months, the employee cancels participation, leaving the EHF empty and the 10 original employees to pay in $1,000 a month for another 2 years to get the EHF back up to $250,000. Is that fair? You and me, and all the employees, who spent two years putting money into our private Employee Health Fund, all gone because of one person who refused to pay into the plan, until he had a major health issue, and then joined the plan with this pre-existing condition, drained all the money, and then left the plan, leaving all of us to pay the high premiums to replenish the fund. So another two years goes by, and the EHF is back up to $250,000, and the company hires another new employee who refuses to join until a year later. Or maybe the previous employee after two years, requests to join the EHF again. What do you do? Are you going to allow them to join, and risk having all of your hard earned EHF money drained away by a condition that developed while the same employee refused to pay into the system? Solution No, what you are going to do is have a pre-existing condition clause. What the clause does, is prevents people from just joining after they already have a problem, when they haven't supported the system to that point. Now, most pre-existing condition clauses don't prevent people from ever getting insurance for a condition that already existed. Generally, most clauses only last for a specified amount of time. Such as, 1 year, or 2 years. Then after you have paid into the system for the given time frame, you can get your pre-existing condition covered. There's a claim that pre-existing condition clauses last forever. If you get something, whatever it is, you can never get insurance coverage for it until you die. Just generally not true. Most clauses only last for a specific time frame. Back to reality With that previous concept in mind, lets go back to how things work in the real world. Insurance companies are exactly the same as our Employee Health Fund, except that a team of managers runs the investments of the fund, instead of just having the money in a bank account. This is actually good for the employees, because invested money makes a greater interest earning than a bank account. That money which is earned from the invested premiums, will off set the cost of paying for health care, allowing not only the management to be paid a salary, but also reduces premiums on the employees. The problem is, insurance companies still don't have any money that is not first gotten from the premium payer. Just like our fictional EHF, it doesn't have any money until the employees put it there. And just like when a our fictional EHF was depleted by someone who refused to pay into the system, but collected benefits on a pre-existing condition, an insurance company has the same problem. People would join with a pre-existing condition, drain the insurance companies reserve funds, and cancel coverage once treated. The result is thus the same as well. Premiums have to go up, to cover those losses. The point of contention The problem is that people hate the idea of profit. CEOs making big salaries confuses the issue for people. Some, particularly on the left, live in the myth that if only they were not making a profit, why.... they could just cover all health care expenses. It's just not true. A company forced to accept all applicants, even with pre-existing conditions, will have to replace those funds the same way our fictional EHF would... by bumping up the premiums on the insurance buyers. And here's the key... The government knew this. http://thehill.com/blogs/healthwatch/health-reform-implementation/268889-hhs-begins-implementing-popular-healthcare-provisions [b] They're some of the most politically popular elements of the Affordable Care Act — Obama often touts the requirement to cover people with preexisting conditions — but also the policies that will have the biggest effect on premiums. ?? Covering people with preexisting conditions is expensive, and the law seeks to bring younger, healthier people into the system to offset the additional costs of covering sick people.[/b] See? They knew from the start that eliminating the ability to decline pre-existing conditions would drastically increase the cost. To off set that, they tried to force people to buy insurance with a tax penalty. We all know that no one is going to buy insurance just to avoid $100 in taxes a year, especially when insurance often costs $100 a month. So we can fully expect that if this ObamaCare law is allowed to come into effect, that health insurance premiums will drastically rise, just as insurance companies have predicted. Now perhaps you are still in favor of this, and that's fine. But there it is. Open for comments.
• United States
3 Apr 13
The obamderthalcare program is supposed to help those with preexisting conditions...However, they have already run out of money for that program so it is moot. They also will not be covering those who are obese or smoke. This is not a healthcare program, it is just another 'control of the people program'... By the way...his preexisting plan was more expensive than those plans already on the market. Yeah, screwed again. There have always been companies that would cover preexisting conditions...most required a waiting time for coverage and then the plan would go into effect. I look into those programs all the time as I have had cancer...They were always slightly more than I made a month so there was no way I could afford them...NOW with the obamderthal's intervention they are about $700 more a month than I make... Gee obamderthal, that was a big help. Nothing is a bargain with that man...He is there simply to bankrupt the US and its citizens.
• United States
1 Apr 13
Several years ago when I was looking into buying heath insurance I was turned down for "Pre existing Medical Conditions." Being big was a medical condition. So I was turned down from even joining. Insurance companies also got off on that clause if someone had got treatment for something at a hospital or doctor office and paid cash. That was also considered pre existing. Based on my experience being big (overweight) was deemed pre existing so if medical insurance companies dont want those conditions wouldnt that mean that half of America couldnt get medical insurance because of being big? Maybe what insurance companies need is more along the lines of something saying that if a patient recieves treatment for an illness or condition then they have to remain on the company's plan to reimburse for the treatment. I have always been against Obamacare and always will be against it.
• United States
1 Apr 13
Yes, there are examples where you can get turned down, because you are too high risk. This usually happens in states that have laws preventing pre-existing condition clauses. Back to my fantasy Employee Health Fund. If the government found out about hour little EHF, and made a law that we can't have pre-existing condition clauses, then we would reject the applicant completely. Another problem would be people who choose to do things that cause expensive medical problems. I had a roommate, who ate herself silly. She showed up one day with two chocolate cakes, as in full size bakery cakes. She said she went to one store, and bought that cake, and then went to another store, and after seeing their chocolate cake, decided to buy it to, so she could eat both and determine which was better. Then she would sit in front of the TV eating chips and watching Biggest Loser, and talking about how she wished she could be one of them. (I'm not making this up) I kicked her out of my house a year later for unrelated reasons, and got a note that she had been diagnosed with diabetes. Anything shocking about this? Again, if such a person were to apply to be part of our EHF, we would decline. It's not fair for someone who is intentionally ruining their health, to join our EHF, and drain all the funds, forcing everyone else to pay for them. The only difference between our EHF, and insurance companies, is that we don't see that forcing insurance companies to pay out on these same people, forces the rest of us to pay in. If we could see that it our own money being used to pay for such people, we would demand pre-existing condition clauses. Do not take offense. Nothing written here was intended to apply directly to you. It was simply an example.