The Affordable Care Act has made some sweeping changes to the way health insurance is bought and sold in the United States. The purpose of the act was to make healthcare more affordable and accessible to all Americans, even those who could not afford or qualify for private health insurance. In addition to other changes, this means that preexisting conditions are handled differently than they traditionally have been by insurance companies.

Traditionally, insurance companies offering private insurance could review an applicant’s medical history and deny coverage based on preexisting conditions. They could also raise an applicant’s raise substantially due to those conditions. While private insurance companies can still do this, the Affordable Care Act has mandated that Pre-Existing Condition Insurance Plans (PCIP) become available. These will cover individuals who cannot qualify for other types of plans.

Despite the availability of PCIPs, understanding how insurance works will help you make the right choice for your needs. If you’re shopping for health insurance, it’s good to know what you can qualify for and which options will work best for you and your family.

Why Health Insurance Companies Deny Coverage for Preexisting Conditions

The purpose of health insurance is to pay for the expense of unexpected medical conditions and certain kinds of preventative care. Because healthcare costs are so expensive, insurance is the only way many people have of covering their medical bills. Insurance companies also need to make a profit, and the only way they can do that is if they pay less in claims than they earn in premiums. This can result in high premiums, especially for insureds who need substantial amounts of healthcare.

If there were no limitations on preexisting conditions, individuals could simply wait until they got sick before buying health insurance. This would keep their costs low and ensure that healthcare could be purchased. Because this would quickly erode profits for the insurance companies, preexisting conditions are screened out during the application process.

The preexisting conditions limitation applies only to private insurance policies. If you are on a group plan through your employer, you usually will not be excluded from coverage for preexisting conditions. This is because the risk pool of a group policy is spread over multiple insureds. All the same, group policy applicants may still be asked about preexisting conditions, and the specific coverages offered on your group policy may vary depending on your response.

How Insurance Companies Know About Preexisting Conditions

When you apply for health insurance, you will be asked about your preexisting conditions. If you lie on the application, you risk being discovered. If you’re discovered right away, the application will be denied. If you’re not discovered until after a claim has been filed, the claim will be denied and you may even face criminal charges for fraud. This can cost you a tremendous amount of money out of pocket, damage your credit or make it impossible to get coverage again in the future.

Insurance companies have a legal right to request your medical records while processing your application. They can contact your doctors, and your doctors are then obligated to provide all records of previous treatments, tests and other notes. All of this healthcare information is stored in a national database and the records there are available for seven years. This makes it particularly difficult to hide your medical history. You can check the website to see what parts of your medical history are available.

Shopping for Insurance When You Have a Preexisting Condition

If you have preexisting medical conditions that appear during the application process, the insurance company may do several things:

  • Refuse to offer insurance coverage at all
  • Offer insurance but exclude any coverage related to your preexisting condition
  • Provide coverage that will pay for everything but at a higher premium than you would otherwise pay.

It’s up to you to discuss this with your insurance company. Before purchasing the policy, be sure you understand what will be covered, how much your premiums will cost and whether there are any limitations to the coverage. Understanding that before applying will help you make a smart choice when it comes to enrolling in coverage. If the company won’t give you suitable coverage, it’s time to look for a different insurer.

It’s always a good idea to be honest on your insurance application. You may not be denied coverage, and the out-of-pocket cost may be less than you’d expect. The risks of being caught in a lie are far worse and much more costly. If you cannot qualify for regular health insurance due to your preexisting conditions, your best bet is to enroll in a PCIP through the state-funded insurance exchange.