Travels With Susan

One of the claims made in the current healthcare debate is that people can't change jobs because they have pre-existing  health problems.  So if you are sick, the argument goes, you have to stay at the same job because most plans have clauses which say the insurance company will not have to pay for medical care if  you had the health problem before you were covered under the new policy.  They say these clauses  prevent people from getting health insurance at their new jobs.  This claim is, largely, false. Under 29 USC §1181 there is a limitation imposed on employer provided health care plans which means they cannot deny coverage for pre-existing conditions if the employee previously had health care insurance. The law which regulates employers who provide health insurance is called ERISA.

  58.5 percent of the population has employer provided health insurance.  Most of the rest have government provided health insurance either under Medicare or insurance programs for the poor and children.  Only a small percentage buy indivdidual policies.

The ERISA approach to pre-existing conditions may provide a reasonable model for individual policies.  It has been in place for about 20 years and has worked well to distribute the risk.  What you need to understand first is that any insurance policy is like a gigantic betting pool.  You are making a bet with the insurance company that you  are going to get sick and they are betting that you won't.  When the bet is on, say, life insurance, it is a lot easier for the insurance company to calculate the odds.  Even major catastrophes don't kill that many people in this country.  So the insurance company looks at a mortality table, does a cursory health exam to make sure you don't have an obvious condition, takes into account your age, weight, smoker status, sex and looks at a mortality table to calculate the premiums.  Not so easy with health care insurance.  Because we are not covering just major unexpected expenses.

If people know that insurance companies are not allowed to deny coverage when they are already sick and receiving expensive treatment, they have no incentive to buy insurance when they are well.  Why should they?  What happened when ERISA was amended to limit the ability of insurance companies providing health insurance through an employer is that the risk of loss is more or less evenly distributed among companies because the employee has to be able to show previous coverage For a certain length of time.  The result is that insurance companies can pretty much rely on the fact that the number of times they get stuck with having to cover someone who has a pre-existing condition will be balanced out by the number of people who leave their coverage and go to other coverage who also have serious health conditions.   So the ERISA provision allows people to switch health insurance plans after they become ill,  but doesn't allow people to wait until they are sick to buy coverage.