Getting sick and paying for it

In certain situations, Americans who become chronically ill have to pay higher rates to continue their health insurance coverage. Although illness can last for any period of time, a typical health insurance contract lasts for one year. This means that insurance contracts often have to be renewed whi...

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Bibliographic Details
Published in:Chicago Fed Letter 2010-05 (274), p.1
Main Author: Pashchenko, Svetlana
Format: Article
Language:English
Subjects:
Chronic illnesses
Classification
Employers
Group insurance
Health insurance
Health Insurance Portability & Accountability Act 1996-US
Insurance companies
Insurance coverage
Insurance policies
Insurance premiums
Risk
Workers
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Summary:In certain situations, Americans who become chronically ill have to pay higher rates to continue their health insurance coverage. Although illness can last for any period of time, a typical health insurance contract lasts for one year. This means that insurance contracts often have to be renewed while people are sick; and policyholders may be exposed to reclassification risk. This article examines how and to what extent the current health insurance system in the US protects individuals against such reclassification risk, and discusses some potential solutions. The problem of reclassification risk arises because insurers charge people different premiums based on their health status. The key to the regulatory approach is forbidding insurers from charging prices based on health status. This type of restriction is known as community rating. The current health insurance system provides only limited protection against reclassification risk. Most people obtain their insurance at a risk-independent rate through their employer.
ISSN:0895-0164
2163-3592