guaranteed issue

If a health insurance plan is described as "guaranteed issue," it means that applicants cannot be turned down for coverage based on their health status. Most job-based group health plans offer coverage on a guaranteed issue basis. Also, a handful of states require insurers to offer guaranteed issue individual policies. It is important to remember that applicants for guaranteed issue plans can be turned down or have their coverage discontinued for other reasons, such as fraud or non-payment of premiums.

The High Cost of Guarantee Issue

Maine, Massachusetts, New York and New Jersey guarantee issuance of health coverage for anyone who would like to purchase a policy and they do not require consumers to consistently maintain coverage. This gives rise to adverse selection. That is, consumers in these states have an incentive to purchase insurance only when they expect to utilize medical services and can drop coverage when they are well. Without enough healthy consumers also paying for coverage, the medical costs are not spread broadly. This drives up premiums for those who do carry coverage.

California Prices Significantly Lower Than States with Guarantee Issue

California’s prices are near the national average for families and individuals. They are also dramatically lower than states with guaranteed issue (GI) of coverage. According to a survey done by America’s Health Insurance Plans (AHIP),2 the annual cost of coverage in California is only $5,884 for a family of three and $2,565 for individuals – 25 to 50 percent cheaper than premiums charged in Massachusetts, New Jersey, and New York where all insurers must guarantee issue all products.

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