YG Financial Services explains what you need to know about taking out insurance when you have pre-existing conditions.

Everyone has health niggles as they get older. If you go to a family doctor (GP) for consultation, the GP will often tell you that your “niggle” is fine and that it’s not a big problem. However, these small issues are not so small when they reach the insurance company. These will become your “pre-existing conditions” and will have an impact when purchasing insurance.

Recently, Ms. Z, a client of YG Financial Services, encountered such a situation. Ms. Z purchased medical insurance through YG Financial Services last year, but did not choose the option for specialist clinics and examinations (specialist+). This year, Ms. Z developed eczema (a skin condition). She went to the GP twice, but it did not improve. Ms. Z considered going to a specialist doctor, and contacted YG Financial Services to ask if the option of specialist consultation could be added to her medical insurance, and whether the insurance company would pay for her dermatologist’s consultation.

The insurance company replied, “In this case, the eczema is part of the customer’s pre-existing medical history, so the insurance company is unlikely to pay the claim.”

YG Financial Services often receives similar inquiries: “I have rhinitis”, “I have kidney stones”, “I have hayfever… Can I still buy health insurance?” YG Financial Services will explain the impact of pre-existing conditions on your medical insurance.

1. What is “pre-existing medical history”?

For insurance purposes, pre-existing medical conditions refers to any physical signs, symptoms, health conditions, medical events etc. that occurred before you purchased health insurance.¹

Your pre-existing medical history does not only include the more serious diseases that everyone understands, such as cancer, cardiovascular disease, etc. Less-serious health conditions (such as rhinitis, eczema, irregular menstruation, etc.) may also be listed as pre-existing medical conditions by the insurance company.

The original intention of insurance is to deal with unpredictable risks.¹ When a customer already has health issues, their risk of future issues (and therefore future claims) increases significantly, so insurance companies will be cautious when reviewing.

For example, in the case study mentioned earlier, Ms. Z had already suffered from eczema and then added the option of specialist doctors afterwards, so the insurance company saw the risk of a future claim as being high. The insurance company is not a charity, and its decision was to treat eczema as an excluded item due to being a pre-existing condition.

2. Will all pre-existing conditions be excluded from cover?

The answer is: not necessarily! But the premise is that you need to disclose all requested information to the insurance company.

You can definitely still buy medical insurance if you have a health condition, but you need to be entirely truthful and transparent with the insurance company when you apply. In other words, you need to fill in the health questionnaire in the policy application honestly and openly.

The insurance company will underwrite your health questionnaire and decide your premium and related insurance terms. After they have reviewed and approved your policy, and as long as you have truthfully informed them of your health status, the insurance company will settle claims according to the policy documents. However, if you do not tell the truth (non-disclosure) and conceal information intentionally or unintentionally, the insurance company may refuse to pay the claim once discovered.

Let’s look at an actual case study:

Miss Y purchased medical insurance in September 2016. In August 2017, needing treatment for a cyst on the left side of her spine, Miss Y applied to the insurance company to pay for the cost of magnetic resonance imaging (MRI) and related drug injections.

When the insurance company looked at Miss Y’s medical records, it found that she had not disclosed two recorded spinal injuries in 2013 and 2016, and another incidence of back pain later on. The insurance company stated that this new information was relevant and they rejected Miss Y’s claim.² It is crucial to provide the whole truth in regards to medical history when you apply for insurance.

Since filling out the health questionnaire is very important, YG Financial Services recommends having the guidance of a professional insurance consultant when filling it out, so that unnecessary troubles can be avoided in subsequent claim settlements.

3. Possible results from the underwriting process

After you openly inform the insurance company of your health status, the insurance company’s underwriting team will review your application and inform you of the outcome. Below are 5 possible underwriting outcomes explained.

• Normal coverage

This outcome is ideal, and the insurance company underwrites your policy with no premium increases and no exclusions.

• Premium coverage

The insurance company adds a certain percentage (loading) onto the normal base premium for your insurance. The increased charges may be 25%, 50%, 75% or more. Let’s look at a real example of policy wording below:

In this policy, the insurance company charges an additional 25% of the normal premium due to the customer’s medical records including high blood pressure and a risk relating to height-to-weight ratio.

In this situation, customers also need to calculate whether the premiums charged are within their budget. Of course, once the policy takes effect, the insurance company will need to pay claims in accordance with the policy.

• Disclaimers and exclusions

The insurance company chooses not to cover pre-existing medical conditions (noted in the policy as exclusions), and any new health issues are covered normally. Let’s take a look at a screenshot of actual policy wording below:

In this policy, the insurance company clearly states which medical conditions (and related treatments) are not covered. This will be based on the client’s medical history.

• Extended coverage

Some insurance companies in New Zealand offer extended coverage. Although there are some exclusion clauses when you purchase insurance, after a certain period of time, you can apply for a review of the policy and provide the corresponding proof to apply for a re-examination of these exclusions. Some excluded items have the opportunity to be removed after inspection and review.

For specific insurance companies that provide these extended coverage services, and for specific insurance details, you can consult YG Financial Services’ professional licensed insurance consultants.

• Coverage denied

This is the worst situation. After the insurance company evaluates your health status, it does not accept your insurance application – probably because your claims risk exceeds the scope of the insurance company’s risk.

In general, it is better to buy medical insurance as soon as possible. The younger and healthier the body, the cheaper the premiums. As a person ages and their health declines, the emergence of “pre-existing conditions” will result in various exclusion clauses or increased cost being included in the policy. In the most serious cases, you may even lose your eligibility for medical insurance.

Still have questions about pre-existing conditions?
Wondering how to apply for medical insurance?
Come and chat with YG Financial Services!

References:

1. https://www.accuro.co.nz/faq/understand-health-insurance/
2. https://www.ifso.nz/case-studies/leaving-out-medical-details-on-your-application-is-a-problem