IQ expert Jason Beans: Mental history can play big part in individual health insurance rates

Q: I’m self-employed and just shopped for health insurance. The process was really difficult. They asked a lot of questions, and I ended up having to pay 20 percent more because of my history of using mental health services. Why did I have to pay more? And why was I interrogated like a criminal?

A: It sounds like you think your mental history alone drove the 20 percent increase. There could have been other information that was gathered during the underwriting process that contributed to this increase.

You have seen firsthand that buying health insurance on your own with any chronic illness or pre-existing health condition, even if it’s just a mild depression, can considerably increase your premium. That’s why it’s a good idea to look into continuing coverage (like COBRA) or group coverage where the federal Mental Health Parity Act could help you considerably.

However, group health plans still may impose some restrictions (such as limiting visits to the doctor or increasing co-payments) on mental health benefits yet still comply with the law.

Underwriting: Knowing the process

Just like with auto insurance, health insurance companies are always trying to assess their risk on the front end to provide an accurate rate. It’s pretty much expected that any company that’s willing to write an individual health insurance policy will review the potential subscriber’s medical history. Depending on your medical history, your premium may be high or coverage could be declined entirely.

When you apply for an individual health insurance plan, the company uses a process called underwriting. That’s where an underwriter evaluates facts that may affect your risk, such as age, gender and health history. Health plans must complete this process before accepting or denying you, so they can provide an actuarial basis (statistic-backed reason) for their decision.

Remember, insurance is a business. Carriers cannot make money if they charge less than they pay out. They gather all information on your past treatments and estimate future costs based on that information. Less data is needed when large companies buy insurance for their employees. The insurers know statistically what the average costs per person will be within a certain range. For an individual, the results can vary dramatically, so more data is needed.

Reporting your health history honestly

What you may have interpreted as being “interrogated as a criminal” may have just been the health plan representative trying to get you to divulge your past as accurately and openly as possible, so your health insurance won’t be taken away from you down the road. You see, people oftentimes leave out pertinent information (like a mental health history) to avoid being quoted a higher premium. Any dishonesty about your medical history can catch up with you.

Health plans may request copies of your medical records to investigate any discrepancies arising from the health-history answers you provide on your application. If you intentionally provide false information or delete certain facts during the application process, the health plan may rescind your insurance coverage.

This means that the health plan can cancel your health insurance all the way back to the day it began, as if it never existed. If this happens, the plan will not pay for any health care services you may have received. Providing false information also may make it difficult to find insurance in the future.

Mental health conditions can be deemed pre-existing conditions; this is evaluated on a case-by-case basis. More than 25 states have health insurance laws that mandate mental health coverage for group plans, such as those for a company’s employees. California, for instance, requires coverage of nine serious mental health conditions, including schizophrenia, bipolar disorder and major depression. That doesn’t mean an individual insurance plan in one of those states will cover a pre-existing condition, however.

If you run into roadblocks, you may be able to get coverage through a state-sponsored health plan. Or you may want to check into whether you’re eligible for Medicaid or Social Security Disability.

There’s a lot of lobbying and talking going on about improving access to health insurance for people with mental health conditions. To stay up to date, visit the website of the National Alliance on Mental Illness.

Jason Beans is CEO of Chicago-based Rising Medical Solutions, a medical cost containment/care management company serving the workers’ compensation, group health, auto and liability markets. Beans founded Rising in 1999. Since then, Beans has received a number of honors, including Business Council Advisory Man of the Year and Midwest finalist for Ernst & Young Entrepreneur of the Year. Rising has appeared several times on the Private Company Index’s Top 10 Growth list and Inc. magazine’s Inc. 5000 list.

Beans earned a master’s degree from MIT’s Entrepreneurial Masters Program and a bachelor’s degree in finance from Boston College.

For more information, visit www.risingms.com.

If you have a health insurance question for Jason Beans, please send it to john.egan@insurancequotes.com.