What Does Medically Underwritten Mean?

Medical underwriting is a process insurance companies use to assess an applicant’s health and lifestyle. This evaluation determines insurability and the appropriate cost of coverage, impacting policy approval and premium rates. It helps prevent adverse selection, ensuring those with higher health risks contribute proportionally higher premiums to the shared risk pool.

What is Medical Underwriting?

The process helps maintain fairness among policyholders, as individuals with similar risk profiles are grouped together for pricing. Medical underwriting is commonly applied to various types of insurance, including individual life insurance, disability insurance, and long-term care insurance. While the Affordable Care Act (ACA) significantly limited its use for individual and small group major medical health insurance plans, it remains a standard practice for other insurance products, such as short-term health insurance and Medicare Supplement (Medigap) plans.

Information Used in Medical Underwriting

Insurers gather information from several sources to assess an applicant’s risk. This includes application questions where individuals disclose personal and family health history, lifestyle habits (like smoking or alcohol use), occupation, and hobbies.

A medical exam is often required, especially for higher coverage policies. Arranged and paid for by the insurer, it includes physical measurements like height, weight, pulse, and blood pressure. It also involves collecting blood and urine samples for lab analysis to check for indicators of various health conditions, such as cholesterol levels, blood sugar, and liver or kidney function.

Insurers may also request an Attending Physician Statement (APS) directly from the applicant’s doctors. An APS is a detailed report from a treating physician that provides insights into a patient’s medical history, current health conditions, treatments, and prognosis. This document helps the insurer understand the full context of any disclosed medical issues.

The Medical Information Bureau (MIB), a non-profit organization, maintains a coded database of health and other information reported by member insurance companies. The MIB helps insurers verify the accuracy of information provided on applications and detect omissions or misrepresentations. While the MIB does not contain full medical records, its codes serve as alerts for potential health issues or previous insurance applications.

Finally, insurers often access prescription drug databases to review an applicant’s medication history. This reveals a comprehensive record of prescribed drugs, dosages, and refill patterns over several years, sometimes up to 10 years. Prescription history can indicate underlying medical conditions, chronic illnesses, or lifestyle choices that might not have been fully disclosed on the application.

Factors in Underwriting Decisions

Underwriters evaluate the gathered information to assign a risk profile to each applicant. Age is a primary factor, as older applicants present a higher mortality or morbidity risk, leading to higher premiums.

Current health conditions, including chronic illnesses like heart disease, diabetes, or cancer, significantly influence underwriting decisions. The applicant’s medical history, encompassing past illnesses, surgeries, and treatments, provides underwriters with a comprehensive view of their health trajectory.

Lifestyle habits also play a substantial role. Smoking, excessive alcohol consumption, or drug use are linked to increased health risks. Engaging in high-risk hobbies or hazardous occupations can also elevate an applicant’s risk profile.

An applicant’s build, assessed through height and weight to determine Body Mass Index (BMI), is another important consideration. Both underweight and overweight or obese classifications can indicate increased health risks and may result in higher premiums. Insurers use their own “build charts” to categorize applicants based on their height-to-weight ratio. Finally, family medical history, particularly the incidence of serious diseases in close relatives, helps underwriters assess genetic predispositions to health issues.

Outcomes of Medical Underwriting

After a thorough assessment, the medical underwriting process culminates in one of several possible decisions regarding an insurance application. The most favorable outcome is typically “Approved as Applied,” which means the applicant qualifies for the standard premium rate without any modifications to the policy terms. This indicates the underwriter has determined the applicant falls within the insurer’s average risk profile.

If an applicant presents an increased risk, they might be “Approved with a Rating,” also known as a substandard rate. This means the policy is approved, but at a higher premium to compensate for the elevated risk. This increased premium is often applied through a “table rating” system, where each table (e.g., Table A, Table B, or Table 1, Table 2) represents a percentage increase over the standard rate, commonly in 25% increments.

In some cases, an applicant may be “Approved with an Exclusion Rider.” This grants coverage but specifies certain conditions, body parts, or risks that are excluded from coverage. For example, a pre-existing back condition might be excluded from future coverage, meaning the policy would not pay benefits related to that specific issue.

An application might be “Postponed” if the insurer requires more information, or if the applicant needs to address a health issue or complete a waiting period. This outcome signals that while the applicant is not currently eligible, they may become insurable in the near future once specific criteria are met or further medical stability is demonstrated.

The final outcome is “Declined,” meaning the application is rejected, and the insurer will not issue a policy. This typically occurs when the assessed risk is too high to be insured, even with higher premiums or riders. Common reasons for denial include severe current health conditions, a history of high-risk behaviors, or significant pre-existing conditions that the insurer is unwilling to cover.