Pre-Existing Condition—What It Is & Why It’s a Big Deal

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At its most basic, a pre-existing condition is a medical condition you have before you apply for health insurance coverage. Pre-existing conditions used to be an obstacle to obtaining coverage in the individual health insurance market in most states, but the Affordable Care Act (ACA) changed that.

Why Pre-Existing Conditions Used to Be a Big Deal

Prior to the ACA, insurers in most states used medical underwriting to determine an applicant's premium and eligibility for coverage. Insurers could simply refuse to sell you an individual market health insurance policy if you had a pre-existing condition. In other instances, an insurer would impose a pre-existing condition exclusion, which meant that the policy stated that any claims related to your pre-existing condition would not be covered.

In some cases, the insurer might have agreed to cover your pre-existing condition, but would have charged you much higher premiums for that coverage than you would have been charged for the same coverage without a pre-existing condition. This approach gained favor with insurers as time went by, simply because it was administratively easier than excluding pre-existing conditions.

Having a pre-existing condition like high blood pressure excluded from your health insurance coverage was a bigger deal than just having to pay for your own high blood pressure pills. The pre-existing condition exclusion could exclude more than just that single pre-existing condition from coverage. It could exclude all other conditions that developed as a result of your pre-existing condition.

For example, if your excluded pre-existing condition was high blood pressure and you had a stroke as a result of your high blood pressure, the health insurance company might refuse to pay for your stroke treatment. It would say that, since your stroke was a direct result of your excluded high blood pressure, the stroke was also excluded from coverage.

Pre-existing condition exclusions made it difficult for people with even simple pre-existing conditions to get health insurance coverage for reasonable premiums. Frequently, they couldn’t get coverage at all. If they were able to get coverage, it was very expensive and/or excluded their pre-existing conditions.

In 1996, HIPAA, the Health Insurance Portability and Accountability Act, put limitations on when health insurers were allowed to exclude pre-existing conditions and on how long a pre-existing exclusion period could be in some instances. However, HIPAA protections mainly applied to people seeking coverage under employer-sponsored plans.

In the individual market (coverage you buy for yourself, rather than obtaining from a job) pre-existing conditions were still a major problem for applicants in most states prior to 2014. It was difficult, expensive, or impossible to obtain health insurance that would cover a significant pre-existing condition and any other potentially related conditions.

The Affordable Care Act and Pre-Existing Conditions

In 2014, the Affordable Care Act’s consumer protections kicked in. Now, thanks to the Affordable Care Act, health insurers in the United States can’t take your health history into account when you apply for a major-medical, comprehensive health insurance policy. They cannot exclude a pre-existing condition from coverage, nor can they charge you more because you have a pre-existing condition.

This has made it much easier for people with pre-existing conditions to buy individual health insurance, to change jobs, to retire prior to being eligible for Medicare, or to strike out on their own as an entrepreneur. People no longer have to worry that they’re one diagnosis away from being uninsurable.

Health insurance sold on the health insurance exchanges created by the Affordable Care Act is guaranteed issue, meaning a health insurance company can’t refuse to sell you health insurance coverage as long as you’re applying for that coverage during the annual open enrollment period or a special enrollment period triggered by a qualifying event. The same is also true for individual major medical coverage sold outside the exchange, which must also be ACA-compliant (and which follows the same open enrollment schedule and special enrollment rules).

When Is Open Enrollment on Health Insurance Exchanges?

Plans That Aren't ACA-Compliant Don't Have to Cover Pre-Existing Conditions

Health insurance plans that aren't regulated by the ACA do not have to cover pre-existing conditions. They can continue to reject applicants based on medical history, to exclude pre-existing conditions, or to charge higher rates based on applicants' medical history.

These plans include short-term health insurance, accident supplements, fixed indemnity coverage, critical illness policies, and other similar types of coverage.

The Trump administration has expanded access to short-term plans, but these policies continue to generally only be a realistic option for healthy applicants without any significant pre-existing conditions.

The Trump administration also finalized regulations to expand access to association health plans (AHPs), although a judge blocked implementation in 2019 and the case is being appealed. If the Trump administration prevails in an appeal and AHPs are allowed to begin marketing to sole proprietors and small businesses under the new rules, these plans are likely to appeal to healthy enrollees (because the coverage will tend to be skimpier than the plans offered in the individual and small group markets). But AHPs will have to cover pre-existing conditions to the extent that the plan covers the condition. They will not be able to reject applicants because of medical history, or to charge them more based on pre-existing conditions.

It's also worth noting that if you're enrolled in Medicare and apply for a Medigap plan after your initial Medicare enrollment window has ended, insurers in most states are allowed to consider your pre-existing conditions when deciding whether to accept the application and what rate to charge (there are limited special enrollment period exceptions to this, but Medigap does not have an annual enrollment window like other private Medicare plans).

And even if you apply for your Medigap plan during your initial enrollment window—when your premiums and eligibility for coverage can't be based on your medical history—the Medigap insurer can still exclude your pre-existing conditions for up to six months if you didn't have creditable coverage prior to enrolling in the Medigap plan (note that some states limit or prohibit this pre-existing condition waiting period, and some insurers choose not to impose it).

In addition, there is no federal requirement that Medigap plans be guaranteed-issue for people who are under 65 years old and eligible for Medicare due to a disability. Some states require Medigap insurers to offer guaranteed-issue coverage to these enrollees, but the premiums are often significantly higher than the premiums that apply to people who are 65+.

If the ACA Is Repealed or Overturned, Will Pre-Existing Conditions Become a Problem Again?

Throughout 2017, Republicans in Congress worked to repeal the ACA. They were ultimately unsuccessful (only the individual mandate penalty was repealed, effective in 2019, under the terms of the Tax Cuts and Jobs Act).

But the Americans Health Care Act (AHCA) did pass the House of Representatives in 2017, although it failed in the Senate. The initial version of the AHCA would have retained pre-existing condition protections, but the MacArthur Amendment altered the bill to allow states to waive some ACA consumer protections. Notably, states would have been able to allow insurers to charge higher premiums in the individual market when an applicant had a pre-existing condition and hadn't maintained continuous coverage for the 12 months prior to enrolling in the new plan. 

The MacArthur Amendment in the AHCA would also have allowed states to change the definition of essential health benefits, so skimpier plans could be sold. That would have indirectly impacted people with pre-existing conditions, as plans that include coverage for their conditions might have become unavailable or prohibitively expensive.

The Senate versions of the legislation that were introduced in 2017 took varying approaches to the issue of pre-existing conditions. In general, while the talking point was generally that people with pre-existing conditions would be protected, the reality was that they might not have been. A common theme was the idea of giving states more flexibility to change the definition of essential health benefits, or block granting the ACA's funding to the states and let them develop their own solutions.

Republican lawmakers briefly considered the possibility of another ACA repeal effort in 2018, but did not move forward with it, and the House switched to a Democratic majority after the 2018 election, taking the possibility of ACA repeal off the table for the time being. [As of 2020, some Democrats are pushing for an expansion of single-payer coverage instead; technically this could be considered a repeal of the ACA, but it would not reset the rules to pre-ACA standards in terms of pre-existing conditions.]

But President Trump and leading Republican lawmakers continue to express a desire to repeal the ACA, and have indicated on numerous occasions that they are still working on the details of a replacement plan. A legislative approach to repealing the ACA would only happen if Republicans regain control of the House and maintain control of the Senate and White House. But there is also a concern that the California v. Texas lawsuit (formerly known as Texas v. Azar) could result in the ACA being overturned, which would end the law's protections for people with pre-existing conditions. Most legal experts agree that the argument is a stretch, but the Trump administration has decided not to defend the ACA from this legal attack, leaving the defense to attorneys general from Democratic-led states. The case will be heard by the Supreme Court during the term that starts in the fall of 2020, with a ruling expected in 2021.

Amid criticisms about the potential elimination of pre-existing condition protections, Senator Cory Gardner (R, Colorado) introduced the Pre-Existing Conditions Protection Act of 2020. The legislation is quite short and simple: It states that individual and group health insurers would not be allowed to impose pre-existing condition exclusions, use medical underwriting to set premiums, or "otherwise exclude benefits, set limits, or increase charges based on any pre-existing condition or health status."

While this does sound like clear pre-existing condition protections, it's important to understand that it would not be particularly useful on its own, assuming the ACA were to be overturned (and to be clear, legislation like this would only be needed if the ACA were to be overturned, since the ACA already includes all of those pre-existing condition protections). In order to truly protect people with pre-existing conditions, health plans must be required to cover essential health benefits, premium subsidies must be made available to make coverage affordable, premiums can't vary based on medical history, pre-existing conditions have to be fully covered like any other medical condition, and coverage must be guaranteed-issue. Gardner's bill does not address essential health benefits or subsidies to make coverage affordable. As a result, it would not really protect people with pre-existing conditions if the ACA were to be overturned.

Eliminating pre-existing condition protections is anathema to most people, as that protection tends to be one of the most popular ACA provisions. But it's also a factor that has caused premiums to increase in the individual market, and some Americans would like to see less robust protections for people with pre-existing conditions, in trade for lower overall premiums.

For the time being, however, all of the ACA's consumer protections remain fully in place as long as consumers shop in the ACA-compliant market (on-exchange or off-exchange). Open enrollment begins on November 1st each year in most states and ends on December 15 of the same year, with coverage effective January 1. This is your opportunity to purchase individual market coverage, and your medical history will not be a factor in your eligibility or your premium. 

If your employer offers health insurance, they will hold an annual open enrollment period when you can sign up or make changes to your coverage. Under HIPAA rules, employees cannot be rejected for coverage as a result of their medical history. And under ACA rules, pre-existing condition waiting periods cannot be applied to an employee's coverage, even if they didn't have coverage prior to enrolling in the employer's plan (note that new employees can still have a waiting period of up to three months before they're eligible for coverage, but once they're enrolled in the health plan it cannot exclude their pre-existing conditions).

Special enrollment periods are also an opportunity to gain coverage for pre-existing conditions, under individual market plans or employer-sponsored plans. Most of the qualifying events that trigger a special enrollment period are the same for both types of coverage, but there are some differences.

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Article Sources
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