Pre-Existing Conditions, Part 1

As of two days ago, most health plans will not be allowed to deny coverage or limit benefits to children on account of pre-existing conditions. More information

This is one provision of the Affordable Care Act that I’m really glad to see. I just wish it would kick in sooner for grownups. We have to wait until 2014 to get the same protection.

And of course there are politicians who think that mandated coverage of pre-existing conditions is a crazy idea, that it will put insurance companies out of business. In a recent speech, Mike Huckabee made a crack about trying to buy auto insurance for a car that was already wrecked. Months ago, when the health care bills were being debated in Congress, I heard Senator Ron Paul argue that nobody would sell homeowner’s insurance for a house that was on fire. I can’t give you a direct quote, but he finished up with something like: That’s not how insurance works. If we’re going to make them do that, maybe we should call it something else.

He may have a point, which I’ll explore in a moment. Before I go any farther, however, I should note that members of Congress and other federal employees have access to a range of health insurance plans, none of which have waiting periods or exclusions for pre-existing conditions.


For people who get health insurance at work — even in the private sector — many large group plans do cover pre-existing conditions (although in some cases, new enrollees have a waiting period before full coverage kicks in.) It’s the folks in the small-group and individual markets that get gouged, limited, or excluded for life.

Back to Senator Paul’s statement. Perhaps without intending to, he pinpointed a profound truth. Health insurance doesn’t work like other types of insurance, and maybe we should call it something else.

There’s a term used in the insurance industry which has migrated into common use and become part of our language. We all know what it means when the kid who’s off at college calls at 2:30 a.m. and says, “Uh, Mom, I totaled the car.”

That statement conjures images of shattered glass and mangled steel, of something wrecked beyond recognition. But in the world of auto insurance, it isn’t always that way. “Totaled” simply means that in the opinion of your insurance company, it would cost more to fix than the car is worth. If it’s an old car with low resale value, the damage may not be extensive. The car may still be driveable. But the insurance won’t pay to fix it. They’d rather call it a total, pay you what they decide it’s worth, and you can use that money toward the purchase of another car.

In the world of health insurance, some policies have annual limits and lifetime limits. If you have a serious illness, and your treatment costs run up against those limits, your insurance won’t pay any more. In effect, it “totals” your body. But unlike a car, you can’t just trade your body in and get another. (Under the Affordable Care Act, annual and lifetime limits also start to be phased out this week.)

If you make too many claims on your auto insurance, your company may decline to sell you a policy in the future, unless you can prove the accidents weren’t your fault. In the health insurance market, if you have pre-existing conditions or some past illness that makes insurance companies nervous, it’s always your “fault.” And they aren’t shy about saying they don’t want you as a customer.

To be continued....