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Health Insurers Deny Coverage to Many Who Apply for Individual Policies

Denial rates of 20 percent or more are common

Denial rates can vary widely within individual states. In Georgia, for example, Aetna's denial rate is 15% compared with 47% for Kaiser Permanente and 67% for John Alden Life Insurance. Also, the same insurer can have vastly different denial rates in different states. For example, Kaiser Permanente denied 32% of applications in Maryland but 17% in Colorado. (Kaiser Health News is not affiliated with Kaiser Permanente.)

James Larreta-Moylan, director of individual and family plans for Oakland-based Kaiser Permanente, said the denial rates vary because of the different types of plans sold, and the age and health conditions of applicants in different markets. He said denial rates can be higher in some markets where sicker patients apply for plans with richer benefits. Medical underwriting, or reviewing an applicant's health status, "is an unfortunate reality of today's market," he said.

Medical underwriting, or reviewing an applicant's health status, "is an unfortunate reality of today's market."

Mike Cantone, 27, of Orlando, was denied a health insurance policy last year by UnitedHealthcare, which considered him a risk because a doctor used a monitor to test his heart for a few days in 2007. No problems were detected, he said. "I was shocked and frustrated," said Cantone, a political director for a community organization. He is still uninsured.

Denial rates of 70% and 53%

Two companies consistently had the highest denial rates — John Alden Life Insurance and Time Insurance, both owned by Milwaukee-based Assurant Health. In nearly every market surveyed, their denial rates were at least twice the rate of competing insurers. For example, in Tennessee, John Alden turned down 70% of applicants and Time, one of the biggest individual insurers in the country, rejected 53%.

Assurant spokeswoman Heather McAvoy said her company offers alternative plans when applicants are rejected due to health status. These can include policies that require consumers to pay extra to cover a pre-existing medical condition. "Unfortunately, when consumers accept the alternative coverage — and are, in fact, insured with Assurant Health — they are classified as a 'denial' under the HHS criteria," she said.

AHIP, the trade group, says the federal data on coverage denials are misleading because they do not include people rejected for one plan but offered another. The data also include denials involving applicants who don't live in the plan's coverage area.

The Department of Health and Human Services acknowledged AHIP's arguments but said it was important for the data to reflect when people can't get the specific policies they apply for. The department said most of the denials are the result of medical underwriting.

Next: How health care reform may help. >>

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