Insurance Reform

The healthcare law bans insurance companies from:                                  Back to Young Adults

- Imposing lifetime or annual limits

Annual or lifetime limits are a hard line on how much an insurance company can spend on your healthcare. For example, say an annual limit on your policy is $100,000, and by a freak accident, you end up having 5 operations, each of which is worth $25,000, in the same year. Because of the annual limit, the insurance company can deny your claim to the last operation’s money, and you will have to pay for it out-of-pocket. Lifetime limits work in the same way, but will cap your expenditures based on a set amount of money for your life.

- Practicing Rescission

Rescission means when insurance companies deny people coverage just before they fall sick. In providing coverage previously, insurance companies had all the power to accept whomever they chose to. So, if they knew that someone was likely to fall sick, they would first take them, but drop them just before their illness started. In this way, they were able to avoid paying doctors for the individual’s illness.

- Pre-existing Conditions Discrimination

Often, insurance companies would charge higher premiums (or monthly payments) for people who had chronic, pre-existing conditions. Such conditions include asthma, high blood pressure, obesity, or cancer. The reason for this was that they did not want to pay for a sick individual. Or, if the individual was likely to be sick, they would charge substantially higher premiums because they knew that they would have to pay doctors and hospitals soon.

- Gender Discrimination

Insurance companies also used to discriminate by gender. Premiums used to be 25% higher for women than for men, because women were likely to need extra maternal healthcare or preventative measures that did not apply to men.

All of these practices are prohibited by the new healthcare reform, in order to keep insurance companies committed to providing healthcare access to their policyholders.

- Medical Loss Ratio:

Insurance companies are also subject to stringent regulations on the Medical Loss Ratio. This is the amount of money collected by premiums versus the amount of money paid to hospitals and providers to give care. Companies use money for marketing, administrative work, and salaries, but previously, were pocketing much of the money from people’s premiums. The law requires small insurance companies to use 80% of their collected premiums on medical care, and large companies to use 85% of premiums on medical care.

- College plans:

Fully insured – insured by a third-party – college plans will also be subject to these regulations. This will improve access to care for millions of students.

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