The foundation of insurance rests on the concept of protecting individuals from risk, uncertain in terms of scope and timing but predictable based on large numbers. People buy home insurance to protect against fire and other risks that can generate property loss. They buy disability coverage to protect against the risk of a condition that impacts the ability to earn a living, and auto insurance to provide protection for themselves and others in the case of an accident.
No consumer would ever expect to gain access to home insurance to protect their home the day after a garage fire or obtain collision coverage the day after automobile accident — and most consumers try to reduce their chance of bad things happening through a variety of risk avoidance and risk reduction techniques. We buy smoke detectors, drive within the speed limit (most of the time), and buy insurance to protect us from unforeseen events.
Health insurance presents many more challenges, however. Many consumers expect to buy insurance coverage only when they need it, and many don’t see much value in reducing their risks.
Even with these challenges, consumers looking for coverage have many options for coverage in the individual health insurance market — even individuals with medical conditions. Following are four quick tips to help you find coverage for your risky clients.
1. Get them married off to someone with group coverage
The fact remains joining a spouse’s policy or finding a new job that provides access to group coverage is a solid approach for ailing prospects seeking to obtain coverage. Since prices are set based on the group’s claim experience, this gives your client a good chance to gain quality coverage at a reasonable price.
Gaining access to an association or affinity group program also may provide a short-term solution — especially if the group is newly formed. However, premium levels can become problematic in the longer run, as the pool matures and the healthy individuals seek cheaper coverage elsewhere.
In addition, some states allow you to form groups of one or two individuals, but that requires some effort and is not consistent across states. Overall, these options have limited viability in a recessionary environment, and if your client or their loved one has commitment issues that preclude the marriage option, one of your best bets is to find them permanent private insurance coverage.
2. Get friendly with private market underwriters
Everything in business is about relationships, so make sure your agency team is actively courting and building relationships with carriers’ underwriting staffs. Agents who have aggregated their volume with a few select carriers and established close relationships with underwriting teams seem to manage the art of underwriting better than others, to the benefit of their clients.
Underwriting is a conservative profession, but most really do want to find ways to write business. And the good news is that acceptance rates for private market coverage have increased by about 20 percent over the last five years. Contributing to this acceptance surge are riders that exclude problematic conditions for a specified period of time and counter-offer programs that provide higher cost-sharing products at standard rates.
Market reform will only increase acceptance rates that are averaging around 85 percent today for producer-driven business. Each carriers’ methods are different and constantly changing based on book performance and competitive factors, so close relationships with underwriters allow you to get a deeper understanding of the carrier’s alchemy behind its underwriting manuals and, in most cases, will help provide you general acceptance rules and even pre-underwriting opinions for your clients.
3. Check COBRA options, but be wary of limitations
The government’s stimulus plan provides up to 65 percent of COBRA premiums, and your client may have rights to take advantage of this opportunity. Visit sites such as www.gohealthinsurance.com/cobra and www.cms.hhs.gov/cobracontinuationofcov to get more details. However, remember that:
- COBRA is not permanent insurance.
- Your clients lose COBRA coverage if the employer drops coverage or goes out of business.
- Any conditions developed during the COBRA period could become pre-existing and excludable conditions for private insurance coverage.
4. Explore government options
Most states provide a range of options including Medicaid, low-income safety net programs such as SCHIP, and high-risk pools for individuals with significant medical conditions. Limitations abound, but a great source to figure what’s available in each state is www.statehealthfacts.org, provided by the Kaiser Family Foundation.
The fact is that it can be difficult to find qualified prospects for health insurance, given that so many people have medical issues. However, just because your prospect is or has been sick does not mean they are doomed to uninsurability. With a little work and creative planning on your part, you may be able to find your prospect proper coverage that can protect them from incurring further costs.
Fred Karutz is senior vice president of business development for Norvax, a developer of Web-based health sales and customer communication tools. He can be reached at firstname.lastname@example.org or 847-370-6456.