A Quick Introduction To California Health Insurance And Pre-existing Conditions, Waiting Periods, And Exclusions

Posted by Nick Niesen on October 29th, 2010

It's important to look at a carrier's policies and restrictions regarding pre-existing conditions, waiting periods and exclusions as they can differ from company to company. This is just an overview in layman's terms.

First...what is a pre-existing condition. The official definition reads as follows:

Pre-existing Condition

Any illness or health condition for which you have received medical advice or treatment during the six months prior to obtaining health insurance. Group healthcare policies cover pre-existing conditions after you have been insured for six months, and individual policies cover pre-existing conditions after you have been insured for one year. Reference CIC Section 10198.7. Creditable coverage must be counted towards any pre-existing condition exclusion in either an individual or group policy.

Essentially, it is a medical condition, illness, or injury for which you just had treatment, are undergoing treatment, or have had treatment in the past. The context in which an insurance company will look at pre-existing conditions strongly depends on the type of insurance.

Individual and Family California health insurance.

This type of coverage is medically underwritten which means that you need to qualify based on health. Pre-existing conditions have the most impact here and it affects coverage in two ways.

First, you must qualify for coverage based on health so a carrier can increase your rates or decline/defer coverage altogether based on your pre-existing conditions. They typically have underwriting guidelines specifying how they may look at particular issues. Ultimately, the underwriter (person who decides to approve or decline health coverage) makes the final decision based on information found in the health application or medical records (if requested).

For some issues, the health insurance carrier may want a certain amount of time away from a give situation before offering coverage. A general rule of thumb is 6 months to one year for a more simple situation (simple broken bone, infection, etc). Some issues are deemed uninsurable for which they will not offer coverage ever.

If you are unable to qualify for individual - family health insurance in California, you can find options for the uninsured through the State such as MRMIP.

The second way pre-existing conditions can affect coverage for Individual Family California health insurance is after approval. If approved for coverage, there can be a waiting period for treatment (payment of) pre-existing conditions of up to 6 months if you did not have prior coverage or lapsed coverage for more than 62 days. Essentially, they will take into account time on a prior qualified plan (may be individual, small group, short term) towards a six month waiting period for pre-existing conditions.

Tier increase with Individual and Family coverage.

If a carrier does not decline coverage based on pre-existing conditions, they can increase rates. Tier 1 is the best rate and you can find this rate when you quote individual California health insurance. Tier 2 is typically 25% higher than this standard rate. Tier 3 is typically 50% higher and Tier 4 is typically 100% higher. Some carriers apply different increases. For example, Blue Shield of California has a Tier 5 which is much higher. This tier increase is not locked in stone and you may be able to have it removed or lowered in the future once time has passed from a given situation (assuming you are in otherwise, good health). We recommend submitting the required change of coverage form every 3-4 months until this tier increase can be increased.

California Small group health insurance and Pre-existing conditions.

Pre-existing conditions are treated differently for Small Group in some important ways. HMO's are typically not subject to waiting periods for pre-existing conditions. Maternity in California is typically not subject to waiting periods for either HMO or PPO plans. Otherwise, the six month waiting period is the same as individual plans. Always submit all claims through the carrier regardless and let them make the decision on waiting periods.

Small Groups do not have tiers but by law, a carrier can go up or down 10% from the standard (Request Small Group California quote at www.calhealth.net) rate based on the health of the group. This is called the RAF (Risk Adjustment Factor). A 1.0 RAF is the standard rate. 1.1 would be 10% higher and .90 would be 10% lower. The larger your group, the more likely you will have a lower RAF. Some carriers automatically give small groups the extra 10% increase as there are fewer people to spread the risk among.

Exclusions of certain conditions

California law prevents carriers from excluding conditions a specific applicant may have (if a covered benefit) upon approval as other states allow. This is a mixed blessing. On one hand, a new enrollee does not need to worry about a condition re-occuring and having coverage declined during a period of time. The downside is that a person might be unable to qualify for coverage altogether which defeats the purpose of banning exclusions to begin with...The law of unintended consequences. Keep in mind that this exclusion is only dealing with a specific person's pre-existing condition. Some plans will exclude certain coverages (i.e. maternity, brand name drugs) by design. A plan's summary and explanation of benefits will list their standard exclusions.

It's important to look at a carrier's policies and restrictions regarding pre-existing conditions, waiting periods and exclusions as they can differ from company to company.