 Personal Finance PowerPoint Presentation Pre-existing Condition Prepare to get financially fit by practicing personal finance. Remember that insurance is part of our long-term risk management strategy where we use the adage of measure twice, cut once, putting a formal plan in place, something like we're going to set the insurance goals, develop a plan to reach them, put the plan in action, review the results and repeat the process periodically. We're now looking at pre-existing conditions. Most of this information can be found at Investopedia Pre-existing Conditions, which you can find online. Take a look at the references, resources. Continue your research from there. This is by Julia Kagan, updated September 16, 2021. What are pre-existing conditions? We've been discussing different types of insurance, noting that medical insurance can be a little bit more complex for multiple reasons including regulations, as well as just the complexity of the medical field and medical industry. So we've got to know a couple more kind of key terms as we try to navigate one of those being the pre-existing conditions, which is probably something that we've heard discussed from a political perspective in terms of what do we do about pre-existing conditions and how might they impact people's ability to be able to get the health insurance. So pre-existing condition is a term that refers to a known illness, injury, or health condition that existed before someone enrolls in or begins receiving health or life insurance. So note that when we think about normal kinds of insurance, if we were to compare this to, say, property insurance, for example, then we're usually trying to safeguard against some kind of future event that hopefully the likelihood of it happening might be small. But if it were to happen, like a home burning down, then it would be financially devastating. Therefore, we want to ensure against it with the insurance. With the medical insurance, it's similar that we might want to ensure one component of medical insurance would be to ensure against a big medical event that could be quite costly and hopefully it's rare to happen. But if it were, we would be able to hopefully cover it and be safeguarded to some degree with the medical insurance. But you can also see if there's political pressure to basically increase the medical insurance to cover a lot of other things, such as the preventative care or the same or the normal kind of routine type of maintenance kind of stuff that we would have as well, which distorts the insurance calculation a little bit as well. Also, if something had already happened and we know that someone's health is compromised from a traditional insurance perspective, the insurer would be saying, well, you've completely changed the risk dynamic because obviously when you're insuring, if you look at a property insurance, for example, if you're insuring against a storm happening or something like that, but now you've increased the likelihood for one individual of their home burning down in some way or another. From an insurance perspective, they're not in the same pool that you can't really use the same risk calculations anymore when you're calculating the insurance. Obviously, the same thing is true with the pre-existing conditions. So that just makes sense logically that the insurance company would then be saying, well, we can't offer the same kind of insurance if there's pre-existing conditions because clearly the risk of the payout is a lot higher. But we want to be able to have people to be covered even if they have the pre-existing conditions and that's where obviously the debate will be. How do we take care of that, especially since we want everybody to have some kind of coverage because that also from an economic standpoint, just from an economic standpoint, will lower the free rider component as well as safeguard those particular individuals. So this includes illness such as heart disease, diabetes, cancer, asthma. So these are kind of things if your insurance company sees those, they're going to say, well, that increases the risk a lot of other kind of problems that will happen because typically problems sent to compound or build on prior problems. So the majority of these conditions are generally considered to be long-term and or chronic in nature. So obviously if you're talking about like a broken arm or something like that, well, once the arm is fixed, not really a long-term problem, hopefully, whereas these other things could be and that means they could compound with other problems. So insurance companies could deny individuals coverage or increase the cost of their premiums based on any pre-existing conditions. The Affordable Care Act, otherwise known as the ACA, made it illegal for insurance companies to deny coverage to or change more for people with pre-existing conditions of any kinds. One more time, the Affordable Care Act made it illegal for insurance companies to deny coverage to or charge more for people with pre-existing conditions of any kind. So obviously you could say that could be a good thing because we want more people to get the coverage, but clearly that also just changes the math in terms of how the, because those costs, those premiums are going to have to kind of be covered some other way because the whole risk calculation has changed with that. Now part of the Affordable Care Act, when they put this into play, was the part of the plan was to try to eliminate the free rider effect, which would mean that people that don't get insurance are getting some at least baseline medical coverage in the event of an emergency and therefore other people are paying for that with their insurance, their premiums are going to go higher for that problem, that free rider effect. So the Affordable Care Act was trying to say I'm going to try to do what we can to put everybody and make everybody get insurance. And even though we got this pre-existing condition kind of thing because we'll be able to get everybody insured and eliminate the free rider thing, then we might be able to control the costs still. But there was a whole bunch of questions about whether or not it's constitutional and whatnot and debates about whether you can force someone to buy insurance. Can you tax someone? And then the tax kind of thing kind of fell through. So you still got this Affordable Care Act in place. It wasn't repealed, but it doesn't have the same full impact as its original intent, which has interesting consequences here. So understanding pre-existing conditions. A pre-existing condition is a health problem, injury or illness that an individual has before they sign up or for or receive health insurance coverage. These conditions include serious illness, such as diabetes, cancer and heart disease, and less serious conditions such as a broken leg and even prescription drugs. The ACA, the Affordable Care Act, also known as Obamacare, which was signed into law by then-President Obama, Barack Obama, in 2010, made it illegal for health insurance company to refuse coverage to individuals or charge them more for having pre-existing conditions. So again, that obviously sounds good to most people. I mean, I wouldn't want to be locked out of insurance because of pre-existing conditions, but at the same time, just from an insurance calculation standpoint, you got to be thinking, okay, well that's going to have some impact on the insurance calculations for the premiums and so on because it's going to have an impact on the pool and all the statistical calculations that they're going to have to do to figure out what the premiums would be. So the law also mandates that health insurance cannot limit benefits or, when coverage begins, refuse to cover treatment for a pre-existing condition. These rules went into effect for plans beginning on or after January 1, 2014. Prior to the ACA, Affordable Care Act, health insurance companies would not cover pre-existing conditions until a specified period of time had passed. In some cases, certain insurers didn't cover them at all. This left certain individuals without insurance coverage, meaning that they were responsible for covering full cost of any medical treatment they received. So again, obviously this would be a bad situation because we don't want anybody to have to cover those costs, especially since the fact that, you know, if you had to do that alone without the insurance company and just because of the way the medical system is set up, the costs are all bloated already. There's high costs on the medical system of all this weird kind of stuff that is going on. So hopefully, obviously what we would like to have is basically people to be insured before the pre-existing condition kind of happens because then they would have paid into the system and they would be covered hopefully before they got the condition and then it would be covered, right? But after the condition happened, it's kind of like trying to get coverage for your property damage after the fires burnt the place, right? You know the cost is already kind of there and so that's kind of the issue. So obviously this has, you don't want people locked out of the insurance system, but at the same time you can see that no matter what you do there's going to be a problem or a change to the whole insurance calculation when you make this kind of adjustment and that's kind of the interplay we see. So the high cost of serious medical expenses often less previously uninsured people financially devastated. Clearly the medical costs are something, especially considering the bloatedness and the weirdness of the market, which can cause really high costs, can financially destroy people. So special considerations, although the ACA Affordable Care Act was adopted to prevent health insurance companies from denying coverage to or raising rates for those with pre-existing conditions, no such provision exists for life insurance companies. So life insurance companies, obviously another kind of insurance will dive in more later. This means that life insurance rules, as such, you can be denied coverage. Insurance underwriters determine your eligibility based on a number of factors, including your overall health. But that doesn't mean that you've precluded completely. You can still buy life insurance policy even if one insurer denies you coverage because of a pre-existing condition. However, you may be charged a higher monthly premium compared to someone of the same age who is healthy. And I mean, just from an insurance calculation standpoint, that would make sense, right? Because what are you doing with life insurance? You're trying to buy life insurance because your income is possibly supporting other people. And if you were to have an accident or die suddenly, then the other people wouldn't have any support. That's why you're buying the life insurance so they can get support. But if you have a condition that increases and you're buying early, then that obviously changes the calculation for the life insurance, right? If you're a young, healthy person at 30 and you're buying life insurance, then you're not really expected to die until 75 or something. But if you have some other condition which greatly increases the likelihood that you're going to die, that changes the whole calculation for the life insurance. So it just makes sense from, you know, just the way things work that that people standpoint that we would like to be able to say, well, we would like everybody to be able to buy life insurance no matter what. But again, it has to play out some way, right? Someone's paying the cost somewhere and nothing's free. So you've got to figure out what's the best way to figure it out. So your death benefit may be lower and your policy will also likely include a waiting period. So repealing Obamacare pre-existing condition on September 2020, then President Donald Trump signed an executive order allowing pre-existing condition protections to stay in place if the ACA Affordable Care Act is repealed. So then, of course, the Affordable Care Act, the idea was they're going to repeal the Affordable Care Act because they didn't like the idea of it going to like a single payer system and so on and they wanted more competition instead of less and this whole argument came into play. But it's really, you know, repealing something that big after it's already been in place usually doesn't really happen. So what ends up happening is some things get repealed. So they kind of like took the teeth out of the Affordable Care Act by not requiring the insurance by not penalizing people that don't have insurance, which kind of eliminated that whole idea of forcing everyone to buy insurance to remove the free rider impact and then other pieces are in place. Ended up playing out. So repealing the law was one of Trump's central campaign promises and the administration moved to make that a reality in March 2019. Legal experts, though, maintained that the executive order was not enforceable because it has no authority to regulate the insurance company, the insurance industry. So again, you get these debates on the federal, what the federal government has the capacity to do within the private industry. So in a letter to a federal appeals court, officials in the U.S. Department of Justice, that's the DOJ, said they agreed with a federal judge in Texas who declared the health care law unconstitutional and added that it would support the judgment on appeal. Other Republican led states also believe the law is unconstitutional. So there's a couple of grounds that it went to about this unconstitutionality with the law, because again, you're kind of forcing people to buy insurance and then you're also forcing people that don't buy insurance for penalizing them with a tax and then the question is, well, can you tax people not to generate revenue but to have them to force them as a penalty as opposed to a tax to generate revenue? It's kind of a little bit strange. So that stance changed, though, when Joe Biden won the 2020 presidential election that Joe Biden administration's DOJ said it no longer supported the efforts of Texas and 17 other states to overturn the law, obviously. So on June 2021, the U.S. Supreme Court struck down Texas changed to the ACA once again in June 2021, the U.S. Supreme Court struck down Texas's challenge to the ACA Affordable Care Act. So what's the bottom line of all this? What's it mean to me? That's what I want to know. When it comes to health and life insurance, pre-existing condition is any known illness, injury or health condition that existed before someone enrolls in their insurance plan. Before 2010, insurance companies could deny individuals coverage or increase the cost of their premiums based on these pre-existing conditions. The ACA Affordable Care Act made this illegal. This change has been popular with most people even those who are not proponents of the Health Care Act itself which has survived several attempts to overturn it. This means that no one should be denied coverage or should have to pay more for their health insurance just because they have long-term or chronic health conditions such as diabetes, cancers or heart disease or less serious conditions such as broken leg or a requirement for prescription drugs.