While it may seem arbitrary or random how premiums are calculated, setting prices in the Health and Life insurance market is actually quite structured.  Factors such as age, height, weight, tobacco use and any health conditions that are present (pre-existing conditions) are considered when an insurance company offers coverage to an individual.  This is quite a contrast to folks who have dealt with Group insurance, which is “guarantee-issue.” 

The Differences Between “Group” policies and “Individual” policies
Shown here are a number of the key differences between those insured under a Group policy and those people who have Individual insurance.

Transition from Group to Individual Coverage Advice from a professional is often necessary when moving from Group to Individual coverage, as when someone becomes Self-Employed (i.e. starting your own business).  For example, moving off of COBRA insurance and onto Individual health insurance can raise issues of timing, insurability, and required compliance with HIPPA federal guidelines and regulations. Often it is not in your best interest to take out COBRA coverage, even if you are eligible.  The issues of transition and insurability are often intertwined and good advice, along with knowledge of the industry and its rules, is essential.  Longhorn will provide the expertise necessary to make the right moves at the right time, always protecting your insurability and coverage for both short and long term.

How Does an Insurance Company Determine your Premium for an Individual Policy?
This process is called underwriting.  Think of underwriting as the insurance company doing its ‘due diligence.’  The insurance company is just as much a consumer as we are.  Of course, it has the resources to do a very professional and thorough job of determining the profitability of purchasing their end of an insurance contract with an individual or family.  After all, the company is putting itself at risk for a potential claim costing millions of dollars.
 
During underwriting, an insurance company can look at the Medical Insurance Bureau (MIB) database, which contains medical data on all US citizens.  In addition, an insurance company can consider any combination of attending physician statement (APS), any medical records, or any other reports that may exist.  Insurance companies can also use “real-time” data, such as paramedical exams that can include height, weight, saliva/blood/urinalysis tests, blood pressure readings, EKG reports, or even a complete physical exam.

Four Possible Outcomes
Once the insurance company has done its research, four outcomes are possible:

1. Issue coverage as proposed by applicant
2. Issue coverage but charge extra premium or “rate” the policy.  For example, the insurance company may elect to cover an individual’s circulatory system, even though the client treats a condition of high blood pressure.  The company often will elect to do so if the client agrees to an additional premium charge
3. Issue coverage but deny coverage for a specific condition that exists.  For example, a client may have had kidney stones in the recent past and the insurance company might issue the policy excluding treatment of kidney stones for at least 12 months
4. Deny coverage altogether based on their estimation of client health risk.