What is guaranteed issue in health insurance?

Navigating the complexities of health insurance coverage is often a challenge, especially for those with known medical conditions. With so many choices, confusing terms, and complicated eligibility requirements, it's easy to get lost.

That's where guaranteed issue policies come in as a real lifesaver. They offer a beacon of hope for those with severe health conditions. But what exactly does this term mean, and how can it impact your health insurance choices?

In this article, we'll go over guaranteed issue, how it ensures coverage regardless of health status, and its role in promoting access to healthcare under the Affordable Care Act (ACA).

In this blog post, you'll learn the following:

• When guaranteed issue became law.
• How the ACA protects individuals with pre-existing medical conditions.
• The differences between guaranteed issue in health insurance and life insurance.

What is guaranteed issue?

Guaranteed issue is a term used to describe a health plan that allows you to enroll regardless of your:

• Health status
• Age
• Gender
• Financial situation
• Any other factors that could influence the likelihood of you using health services

This means insurance companies can't deny coverage to applicants with pre-existing conditions. Depending on the state, insurers won’t charge¹ those with pre-existing conditions more to enroll.

When did guaranteed issue become law?

The ACA implemented guaranteed issue in 2014, marking a significant shift in the healthcare landscape by promoting inclusivity and reducing discrimination in the insurance market. It requires insurers on the individual and small group Marketplaces to sell guaranteed issue plans. Before the passage of this law, insurance companies in most states based eligibility on an applicant's medical history.

Prior to the ACA, only Maine, Massachusetts, New Jersey, New York, and Vermont required guaranteed issue individual plans for everyone. Washington also required guaranteed issue plans, but only to those who got a minimum score on a health status questionnaire.

The ACA's guaranteed issue has played a crucial role in expanding coverage and improving access to healthcare for millions of Americans. Now health insurance companies on the federal and state Marketplaces can't deny coverage or charge higher premiums based on an individual's pre-existing health conditions. This ensures that everyone has access to health insurance regardless of their medical history. However, this rule doesn’t apply to certain types of plans, like short-term policies.

According to KFF², HIPAA required guaranteed issue for small group health insurance plans prior to the ACA. However, since this only applied to employers with two to 50 employees, most people still had plans subject to underwriting.

Pre-existing conditions in America

Pre-existing conditions can include life-threatening illnesses and chronic conditions like cancer, diabetes, asthma, or heart disease.

Pre-existing conditions³ affect people of all ages:

• There are 4 to 17 million children younger than 18 years old with some type of pre-existing condition.
• Older Americans between 55 and 64 years old are at particular risk, with 48% to 86% of people in this age bracket having some type of pre-existing condition.

Without the protections of the ACA, these pre-existing conditions would threaten their access to health insurance coverage.

How do guaranteed issue policies work?

All major health insurance policies sold on individual health insurance markets across the country come with guaranteed issue. This means your medical history doesn’t matter anymore when you’re trying to sign up. So, if anyone can enroll, how do insurers protect themselves from this increased risk?

Before 2014, you could apply whenever you wanted, but most states would check your medical history to see if you qualified. This led to some people getting coverage only when they got sick or needed care. Now, you can only enroll during one set annual enrollment period each year. You can also qualify for special enrollment periods (SEPs) that kick in for certain life events. This mandate and the restricted enrollment periods apply to both on-exchange, through the Health Insurance Marketplace, and off-exchange options⁴.

Guaranteed issue vs. medical underwriting

Before the ACA, insurance companies used medical underwriting⁵ to assess an applicant's health condition and risk profile. Medical underwriting was crucial for determining premiums and could lead to denial of coverage. By evaluating these factors, insurers could gauge if offering coverage to an individual or business would be a financially sound decision.

The ACA has limited the use of medical underwriting for individual and small-group health insurance. However, medical underwriting is still used for some types of insurance.

The following plans may still be subject to medical underwriting:

• Short-term health insurance
• Disability insurance
• Medigap plans
• Large group health insurance coverage (as a whole group, not for an individual in the group)

How employers can support employees with personalized health benefits

It's impossible to know which of your team members are dealing with medical issues. The easiest way to support the diverse needs of your employees is with a health reimbursement arrangement (HRA). Instead of covering your unique workforce with a one-size-fits-all group health plan, you can allow them to choose the individual health plans that work best for their situations. You simply set an allowance for your employees to use on their healthcare needs.

An HRA allows you to reimburse employees tax-free for more than 200 eligible out-of-pocket expenses, including:

• Monthly premiums for individual health, vision, and dental plans
• Preventive care
• Emergency care
• Chiropractic care
• Prescription drugs
• Over-the-counter medication

With this flexible health benefit, your employees can choose their own coverage, network, or premium amount. An HRA also allows them to pick the guarantee issue plans that work with their preferred doctors or services. Then, they can choose which expenses they want to submit for reimbursement.

What is guaranteed issue in life insurance?

Guaranteed issue extends beyond health insurance coverage. If you're interested in a life insurance policy, you may be curious about how this term comes into play.

Unlike health insurance, there's no requirement for life insurance coverage⁶ to be guaranteed issue. For this reason, a guaranteed issue life insurance policy is usually purchased by someone with serious health issues who wouldn't qualify for any other policies.

Guaranteed issue life insurance, also known as guaranteed acceptance life insurance, is a type of whole life insurance policy. This type of life insurance can also be referred to as “no questions life insurance” or “no questions final expense insurance.”

It doesn't require you to:

• Answer health questions.
• Undergo a medical exam.
• Allow an insurance company to review your medical and prescription records.

But these advantages for those with pre-existing conditions come with a catch. In comparison to other forms of life insurance, guaranteed issue policies typically have higher premium costs due to the medical conditions of their policyholders. These policies also have lengthy waiting periods. This means if you were to die during the waiting period, your beneficiaries won't receive your policy's death benefit⁶. The waiting period for guaranteed issue life insurance can be anywhere from two to three years.

Conclusion

With guaranteed issue health plans, you can feel confident in your ability to secure comprehensive health insurance coverage without discrimination. Thanks to ACA protections, insurance companies can't deny coverage because of your health condition, age, or financial situation.

1. Guaranteed issue
2. KFF Health Insurance Market Reforms: Guaranteed Issue
3. CMS At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans
4. What is Guaranteed Issue?
5. What Is Medical Underwriting?
6. Know the Difference: Guaranteed Issue vs. Underwriting
7. Death Benefit: How It’s Taxed and Who Can Claim It