Health Insurance: Frequently asked questions

I am trying to buy an individual health plan on my own because I need coverage for my sinus problems. I've never had health insurance before. I've already been turned down twice because the insurers say there's no "guaranteed-issue" law. What does that mean?

"Guaranteed-issue" laws mandate that an insurer offer a health plan to any applicant for coverage, regardless of current or past health problems (assuming you can pay the premiums, of course).

These are generally state laws, not federal. However, HIPAA, the federal Health Insurance Portability and Accountability Act, requires some health plans to sell guaranteed-issue plans to qualified individuals and businesses. For details on eligibility, read HIPAA: Your rights to health insurance portability.

Not all states have guaranteed-issue laws. In those states, health insurers can reject your application for coverage based on your health status. If the insurer thinks you pose a high risk — that is, if you're likely to have numerous claims for treatment or you have had serious health problems in the past — they can deny you coverage. To find out which states require guaranteed-issue plans, as well as other details about your health insurance rights, check the Insure.com Health Insurance Laws & Benefits Tool.

Some states require guaranteed-issue plans only for small employers buying group health plans — not for individuals. Other states require insurers to sell only a bare-bones health plan on a guaranteed-issue basis. In addition, a states's guaranteed-issue law might not apply to all health plans; instead it might apply only to traditional indemnity plans, not HMOs.

There's quite a bit of controversy about guaranteed-issue laws. Critics of such requirements note that, in theory, you can choose to go without health insurance (saving a few bucks) and join a plan only when you become sick or injured. Then, after completing medical treatment and running up hospital and doctor bills, you can drop your coverage, secure in the knowledge that health insurance will be readily available if you become sick again.

Because of that, insurers compensate by raising premiums for everyone with individual coverage. The higher premiums, however, encourage healthier people who have little need for treatment to drop their coverage. That leaves fewer and less-healthy people in the pool. To make up for that, insurers again raise rates, spurring even more people to drop coverage — a process known in the industry as a "death spiral."

To thwart that spiral, some states require insurers to sell guaranteed-issue plans during brief periods of time each year (often just a month, and often in the fall) — which is known as an open enrollment period.

A final note: Bear in mind that guaranteed-issue laws do not apply if you live outside of the health plan's service area or if you've committed insurance fraud.

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