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Imagine many years ago you suffered mild depression when you broke up with your significant other and you briefly sought mental health help. Now you’re happy and healthy, but you get a rude awakening when you try to buy individual health insurance: One by one your applications for individual health insurance are denied based on the six counseling sessions you had a decade ago, which are permanently recorded in your medical history.

You’ve all but forgotten about your ex, so how can this seemingly insignificant episode be coming back to haunt you? Are you really on your way to becoming uninsured?

You could be if you’re trying to obtain individual health insurance, according to Karen Pollitz, a Georgetown University researcher who co-authored a study on the individual health insurance market for the Kaiser Family Foundation (KFF) with Richard Sorian and Kathy Thomas. Individual insurers might deny you coverage based on your medical history if it includes:

  • Use of prescription drugs to treat anxiety, depression, or a physical condition, including Ativan, Klonipin, Paxil, Prozac, Serzone, Zoloft, Xanax, and Wellbutrin.
  • Counseling for anxiety, depression, grief, or an eating or sleep disorder. Even if you briefly sought counseling as a way to cope with the September 11th terrorist attacks, you could be denied individual health insurance, according to researchers with Georgetown’s Health Privacy Project.

“People who’ve always had group health insurance are completely unprepared when they’re forced to seek coverage in this [individual health insurance] market,” says Pollitz. “They think they’re going to get the same coverage they had in their jobs, except they’ll just have to pay a little more money. It’s absolutely not like that at all. The individual health insurance market is unpredictable, inconsistent, and expensive.”

Dr. Deborah Peel has seen the unpredictability of the individual health insurance market up close. Peel, a former-president of the National Coalition of Mental Health Professionals and Consumers, recalls a young graduate student whose sleep apnea was treated with antidepressant medication. When he was dropped from his parents’ group health insurance plan due to his age, he began applying for a policy in the individual market. He was turned down several times because his medical records showed he had taken an antidepressant — even though the medication was for a physical rather than mental condition.

Peel says all doctors should give their patients a “Miranda-like warning” that anything they say or treatment they receive might be shared with a third-party payer (such as an insurer). “Ethically, doctors and all mental health professionals are responsible to disclose anything that might possibly harm their patients, including the fact that information they share with you might possibly be cause for an insurance denial later on.”

Unpredictable, inconsistent, and expensive

A number of everyday circumstances can force someone to seek individual health insurance coverage.  They include: losing status as a dependent on a parent’s health plan; getting a job that doesn’t offer group health insurance benefits; becoming self-employed; retiring before age 65; and coming to the end of your health insurance benefits under COBRA, the federal health insurance safety net for families in the midst of crisis, such as unemployment, divorce or death.

One of the biggest shocks you might encounter when moving from a group health insurance policy to an individual policy is the individual health insurer will consider more than just your age and personal medical history when deciding whether to offer you a policy.

In their study “How Accessible is Individual Health Insurance for Consumers in Less-than-Perfect Health?” Pollitz and her co-authors say 90 percent of the time, the less-healthy health insurance applicants in their study were unable to buy policies from individual insurers at standard rates, and 37 percent were rejected. Of the 63 percent who were accepted, most had benefit restrictions placed on them (28 percent), or premium surcharges (13 percent), or both (12 percent).

KFF warns even if you’re in perfect health, you might still face barriers to getting a policy, based on your age. KFF’s study found premiums for a healthy 62-year-old man were three to six times higher than for a healthy 24-year-old woman.

Another shock you might encounter when buying an individual health policy is health insurance is often not subject to any kind of rate regulation. Only five states (Maine, New Hampshire, New Jersey, New York, and Vermont) guarantee you access to the individual market at community-rated premiums that are not based on your health status. These states also limit coverage exclusions that insurers can impose because of pre-existing conditions.

Very few consumers who seek individual health insurance have protection through federal law. The Health Insurance Portability and Accountability Act (HIPAA) requires insurers to sell a health insurance policy without coverage limits to you if you have had at least 18 months of continuous coverage and are moving from one group health insurance policy to another group policy. HIPAA does not limit what health insurers can charge for such coverage.

Why are individual health insurers so picky about whom they choose to insure? According to Thomas, the statistics tell the story: “The sickest 1 percent of your policyholders can comprise between 40 to 50 percent of all your claims. That’s what makes health insurance such a risky business.”

While life insurers only have to pay out a death claim once, health insurers may have to pay out numerous claims over many years for one sick person. Individual insurers can’t spread out that risk among groups of many people the way group health insurers or self-insured employers do.

Impact on consumers

Approximately 18.8 million adult Americans suffer from some form of depression in any given year, according to the National Institute of Mental Health. Statistics show one in five of us will experience a major episode of depression during our lives. Mental health professionals and privacy advocates say people who need mental health help should not go untreated for fear that they might be denied health insurance in the future. Even so, there is evidence some people are already putting off treatment for fear of being penalized.

According to the California Health Care Council’s “Medical Privacy and Confidentiality” survey, 15 percent of American adults say they have done something “out of the ordinary” to keep their personal medical information confidential. The steps they have taken to protect their medical privacy include:

  • Paying out-of-pocket when they already have health insurance in order to avoid disclosure.
  • Not seeking care to avoid disclosure to an employer.
  • Giving inaccurate or incomplete information on a medical history form.
  • Asking a doctor to not write down a health problem or to record a less serious or embarrassing condition.

Child psychiatrist Dr. Barry Herman says many of his patients’ parents, who he says tend to be well-educated and financially stable, understand the possible ramifications of having their child’s treatment disclosed to a third party. “It’s not at all unusual for them to pay cash or ask for free samples of medication [instead of a prescription],” says Herman. “They don’t want a paper trail.”

What about the paper trail you create when you complete an application for individual health insurance? A standard application will ask you more than 20 specific questions about your medical history, going back 10 or more years. Not only are you asked to disclose whether you have ever had any “symptoms of, diagnosis of, or treatment or medication for” such obvious health problems as cancer, diabetes, high blood pressure, and HIV, but you must also inform the insurer about any allergies, anxiety, benign cysts, breast augmentation, depression, earaches or sexually transmitted diseases.

“It’s not at all unusual for them to pay cash or ask for free samples of medication. They don’t want a paper trail.”

While you might be tempted to lie, this is never a good idea. Lying on your health insurance application is fraud. If you are caught, the health insurer can cancel your policy. If you don’t think you can be easily caught, think again. Select individual and small group health insurers now have access to medical information on more than 16 million people contained in files warehoused by the Medical Information Bureau (MIB).

The MIB provides medical information that insurers use to compare notes on applicants.

What can you do?

What if it’s already too late for you to pay cash for your antidepressants or counseling sessions. Can you still get individual health insurance? It’s possible, say the KFF study’s authors, but it will probably take a great deal of persistence and there are no guarantees. Even if you are offered a policy, it will inevitably be more expensive than group health insurance and it will no doubt limit or even exclude certain coverages.

The best you can do is to fill out any applications for individual health insurance to the best of your ability and be truthful. An experienced health insurance broker who knows the underwriting criteria of several individual insurers might increase your chances of acceptance.

If you’re denied, ask your doctor to write a letter supporting your re-application, particularly if you are no longer taking medication or receiving mental health treatment. “When we did the study, we found that there aren’t any hard and fast underwriting rules,” says Pollitz. “There’s a great deal of variability from insurer to insurer.”

Additionally, once you are denied, you will have to answer “Yes” to the question that asks you to disclose whether you — or anyone to be covered under your policy — has ever had an application for life, disability, or health insurance “declined, postponed, rated up, modified, or terminated.”

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Penny Gusner


Penny is an expert on insurance procedures, rates, policies and claims. She has extensive knowledge of all major insurance lines -- auto, homeowners, life and health insurance. She has been answering consumers’ questions as an analyst for more than 15 years and has been featured in numerous major media outlets, including the Washington Post and Kiplinger’s.