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What Is Post-Claims Underwriting?

 Post-claims underwriting happens when an insurance company accepts an application for coverage and then waits until if and when the policyholder files a claim to adequately assess the risk involved with covering that particular policyholder. Post-claims underwriting can occur with any type of insurance, including health insurance.

Medical Underwriting Basics

To understand post-claims underwriting, you have to first understand how medical underwriting works in general. The basic idea is that insurance companies want to minimize risk by thoroughly evaluating an applicant's medical history—or in the case of an employer group, by evaluating the group's overall claims history.

Medical underwriting allows an insurer to reject an applicant altogether, exclude specific pre-existing conditions, or charge a higher premium based on medical history.

As of 2014, the Affordable Care Act (ACA) ended medical underwriting for individual and small group major medical health plans. Individuals are now limited to enrolling in coverage only during open enrollment or a special enrollment period triggered by a qualifying event, but insurers cannot use an applicant's medical history in any way when determining eligibility for coverage or in processing claims.

Due to the Health Insurance Portability and Accountability Act (HIPAA), small group health plans were already guaranteed-issues , But insurers in many states were allowed to charge premiums that differed depending on a group's overall medical history, and employees who didn't have prior continuous coverage could face waiting periods before they had coverage for pre-existing conditions.

Under the ACA, none of that is allowed anymore. Premiums for small groups are not based on the group's medical history, and there are no longer any pre-existing condition waiting periods.

Medical underwriting is still used, however, for short-term health insurance plans, Medigap plans after a person's initial enrollment period ends (some states prohibit this, and there are some circumstances that trigger special enrollment periods with guaranteed-issue rights), and large group health plans (defined as 51 or more employees in most states, although California, Colorado, New York and Vermont define large group as 101 or more employees.

Note that medical underwriting for large group plans applies to the group's overall claims history, rather than to individual members of the group. Medical underwriting is also used for life and disability insurance policies.

How Post-Claims Underwriting Is Different

Medigap insurers and large group health insurers tend to do their due diligence on the front end, at the time the application is submitted. The process that Medigap insurers use includes gathering information from the applicant, the applicant's doctors, and pharmacy databases.

This sort of process was commonly used in the individual major medical market before the ACA eliminated medical history as a factor that insurers could use. It was not uncommon for an insurance company to take several days or even a few weeks to determine whether to accept an applicant, and if so, whether to exclude any pre-existing conditions or charge a higher premium based on medical history.

But some insurers relied partially or fully on post-claims underwriting, which was essentially a wait-and-see approach—issuing the policy based on the applicant's summary of their own health history, but reserving the right to request medical records later on, if and when a claim was filed.

At that point, if the insurer found evidence that the applicant had not been entirely truthful about their medical history, the policy could be rescinded. Under the ACA, rescission is limited to cases of fraud or intentional misrepresentation, and medical history is no longer a factor at all.

Short-Term Health Plans and Post-Claims Underwriting

Short-term health plans are not subject to any ACA regulations, and for the most part, they tend to rely on post-claims underwriting. These plans usually have very simple, short applications that include a handful of yes/no questions about serious medical conditions, body mass index (BMI), pregnancy, etc.