AIDS and Health Insurance: An OTA Survey

February 1988

NTIS order #PB88-170204
AIDS

and

HEALTH INSURANCE

An OTA Survey

by

Jill Eden, Study Director

Laurie Mount

Lawrence Miike

Health Program

Office of Technology Assessment

United States Congress

Washington, D.C. 20510-8025

February 1988

A Staff Paper

in OTA’S Series on

AIDS-Related Issues

The views expressed in this Staff Paper do not

necessarily represent those of the Technology

Assessment Board, the Technology Assessment

Advisory Council, or their individual members.
CONTENTS

Page Number

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......... 1

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Commercial Health Insurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Blue Cross/Blue Shield Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Health Maintenance Organizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

SURVEY RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Medical and Other Factors in Risk Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Commercial Health Insurers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Blue Cross/Blue Shield Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Health Maintenance Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Sources of Medical Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Commercial Health Insurers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Attending Physician Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Physical Exams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Blood and Urine Screening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Blue Cross/Blue Shield Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Health History Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Attending Physician Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Physical Exams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Blood and Urine Screening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Health Maintenance Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Health History Questionnaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Attending Physician Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Physical Exams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Blood and Urine Screening . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

AIDS Policies and Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Commercial Health Insurers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Blue Cross/Blue Shield Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Health Maintenance Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

(Continued...)

ii
Page Number

Top Ten Most Costly Conditions: AIDS vs. Other Major Illnesses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Commercial Health Insurers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Blue Cross/Blue Shield Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Health Maintenance Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

APPENDIX A: SURVEY QUESTIONNAIRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

APPENDIX B: LIST OF ABBREVIATIONS and GLOSSARY OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

LIST OF TABLES

Table Number Page Number

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

110

Response to the Survey: Commercial Health Insurers, BC/BS Plans,

and HMOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Commercial Health Insurers: Annual Volume of Applicants for Individual

Health Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Characteristics of the 15 Responding Blue Cross/Blue Shield Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Characteristics of the 16 Responding HMOs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Risk Classification by Commercial Health Insurers: Common Conditions

Requiring a Higher Premium, Exclusion Waiver, or Denial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Commercial Health Insurers: Risk Classification of Individual Applicants . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Commercial Health Insurers: Estimate of Industry-Wide Risk Classification

of Individual Applicants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Individual Underwriting by Commercial Health Insurers: The Importance of

Non-Medical Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Blue Cross/Blue Shield Plans: Risk Classification of Individual Applicants.........................l 8

Blue Cross/Blue Shield Plans: Estimate of Industry-Wide Risk Classification

of Individual Applicants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Individual Underwriting by Blue Cross/Blue Shield Plans: The Importance of

Medical and Other Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

(Continued...)

. . .

111
Table Number Page Number

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

Health Maintenance Organizations: Risk Classification of Individual

Applicants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Health Maintenance Organizations: Estimate of Industry-Wide Risk

Classification of Individual Applicants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Individual Underwriting by Health Maintenance Organizations: The Importance

of Medical and Other Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Commercial Health Insurers, BC/BS Plans, and HMOs: Individual Underwriting

Information Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Individual Underwriting by Commercial Health Insurers: Annual Volume of

Attending Physician Statements, Physicals, and Testing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Individual Underwriting by Commercial Health Insurers: Reasons for Requiring

an Attending Physician Statement or Physical Exam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Commercial Health Insurers: Commonly Ordered Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Individual Underwriting by Blue Cross/Blue Shield Plans: Reasons for

Requiring an Attending Physician Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Commercial Health Insurers, BC/BS Plans, and HMOs Attempting to Identify

Individual Applicants Exposed to the AIDS Virus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Commercial Health Insurers, BC/BS Plans, and HMOS: Methods Used to Screen

Individual Applicants for Exposure to the AIDS Virus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Commercial Health Insurers: HIV Testing Practices and Criteria for High

Risk Applicants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. . 

. . . . . . . . . . . . . . . . 33

Commercial Health Insurers: Range in Individually Underwritten

AIDS-Related Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Commercial Health Insurers: Range in 1987 Individually Underwritten

AIDS-Related Cost Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Commercial Health Insurers and BC/BS Plans Reporting AIDS Cases:

Prevalence of Cases With a Preexisting Condition for AIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Response to the AIDS Epidemic: Reported Plans by Commercial Health Insurers,

BC/BSPlans, and HMOS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 

. 36

Blue Cross/Blue Shield Plans: Number of Subscribers Reimbursed for AIDSRelated Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Blue Cross/Blue Shield Plans: Projected AIDS-Related Claims Cost for 1987.....................39

Health Maintenance Organizations: Range in AIDS/ARC Caseload . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Commercial Health Insurers: AIDS vs. Other Major Illnesses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Blue Cross/Blue Shield Plans: AIDS vs. Other Major Illnesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

iv
SUMMARY

Insurance testing for HIV (human immunodeficiency virus) infections has generated much controversy and disagreement

among insurers, insurance regulators, insurance applicants, legislators, and other

policy makers. Yet, there is little information

on who insurers test and what tests they require. This survey is therefore an attempt to

provide a view of HIV testing in the context

of other routine tests required by health insurers and had a twofold purpose: 1 ) to collect basic information on underwriting practices and the use of medical screening by

health insurers; and 2) to document how

health underwriters are responding to the

AIDS epidemic.

This survey was conducted as part of an

Office of Technology Assessment (OTA) assessment on medical testing and health insurance that will be published at a later date.

OTA is also monitoring AIDS-related developments for the U.S. Congress, and the survey results are being published by OTA as

the second in a series of Staff Papers on

AIDS-related issues.

Background

About 14.5 million non-Medicare individuals and their family members have health

insurance without the benefits of group

membership. These are the principle individuals that must meet underwriting standards to

obtain health coverage, and their insurers

were the focus of the OTA survey. Commercial companies insure 9.3 million; Blue Cross

and Blue Shield (BC/BS) plans, 4.2 million;

and Health Maintenance Organizations

(HMOS), 1 million.

In order to evaluate an individual’s insurability, health insurers ask pertinent questions regarding the applicant’s medical history, gather information on the applicant’s

past and current medical condition through

statements and records provided by the applicant’s attending physician, and in selected

instances, require the applicant to undergo a

physical examination and medical testing.

AIDS antibody testing, which, when positive,

reflects infection with the AIDS virus, is

considered by insurers to be a logical and essential component of this overall risk assessment.

The survey was sent to 88 commercial

insurers who comprise 70 percent of the

commercial, individual health insurance

market; to 15 of the 77 BC/BS plans; and to

the 50 largest local and national HMOS in the

United States. Seventy-three of the eightyeight commercial insurers responded, although only 62 met the survey requirements;

approximately 57 percent of the commercial,

individual health insurance market is

represented in the survey findings. All 15

BC/BS plans completed the survey, and 39 of

the 50 HMOS responded, but only 16 reported

that they allow individually underwritten enrollment. Overall, 83 percent of the commercial carriers, BC/BS plans, and HMOS that

were surveyed responded.

Survey Results

Medical and Other Factors in Risk

Classification

There are three basic outcomes of risk

classification: the applicant is covered on a

standard or substandard basis, or not at all.

Almost three-quarters of individual applicants

for commercial health coverage are classified

as “standard” by the responding insurers and

can purchase a policy without extra premiums

1
AIDS and Health Insurance: A Survey February 1988

or special limitations. Twenty percent are

rated as “substandard” and issued policies that

exclude preexisting medical conditions, have

a higher than standard premium, or both.

The exclusion may be for a specific condition, such as gallstones, or for an entire organ

system, such as reproductive disorders.

Finally, 8 percent of applicants are judged

uninsurable and denied coverage. Most

serious diseases are uninsurable, including

severe obesity, diabetes mellitus, emphysema,

alcoholism, coronary artery disease, cancer,

schizophrenia, and AIDS.

Risk classification by the responding

BC/BS plans is similar to the commercial approach except for four “open enrollment”

plans that accept all applicants regardless of

health status. The respondents accept 83 percent of individual applicants as standard, 9

percent with substandard policies, and deny

coverage altogether to 8 percent.

HMO risk classification differs from the

o the rs. Federally qualified plans ar e

restricted to either accepting applicants at a

community rate or denying membership

altogether. As a result, exclusion waivers and

substandard premiums are not common. The

responding HMOS, however, were no more

willing to underwrite high-risk applicants

than the commercial insurers or BC/BS plans.

They accept 73 percent on a standard basis

and deny membership to 24 percent of individual applicants.

Other factors besides ill health can

seriously hamper access to commercial health

coverage by individual applicants and their

family members. Dangerous health habits

(e.g., drug abuse), illegal or unethical behavior (e.g., criminal business practices), age, occupation, and financial status were most commonly cited by commercial insurers as critical

to determining insurability. Healthy habits,

such as non-smoking, were also rated as important, an indication of the increasingly

common use of premium credits for nonsmokers. Place of residence was an important

factor to a significant minority of commercial

insurers, mostly due to concerns about insurance fraud known to occur in certain localities and because of regional variations in

health care costs. Contrary to guidelines

issued by the National Association of Insurance Commissioners (NAIC), thirteen companies use sexual orientation in underwriting

and five consider it important or very important. Three companies request an attending

physician statement (APS), and two order a

physical exam based on sexual orientation. It

is unclear how insurers ascertain an applicant’s sexual preference. Most of the respondents (48/61) provided samples of their health

insurance applications, none of which included any questions concerning sexual

orientation or lifestyle.

In contrast, BC/BS insurability is almost

purely a question of medical condition. All

the responding BC/BS plans, except the four

that hold open enrollment, reject some applicants in poor health. Nearly half of the

plans deny nongroup applications because of

alcohol or drug abuse. No BC/BS plan

reported using sexual orientation in underwriting.

Access to HMO membership is fundamentally a matter of health status as well.

However, age, type of occupation, health enhancing behavior (e.g., non-smoking), and

sexual orientation were also considered key to

insurability by 19 percent or more of the

responding plans. As in the case of the commercial carriers, it is not clear how sexual

orientation is identified by the four HMOS

that consider it a key underwriting factor.

Sources of Medical Information

Beyond the health information provided

directly in insurance applications, an APS is

the most common supplemental source of information. The commercial carriers require

an APS for 20 percent of their applicants.

Almost three-quarters of BC/BS plans order a

physician statement for at least 30 percent of

their applicants, and more than half the

responding HMOS require one. In fact for

most applicants, in lieu of ordering a

laboratory test, traditional insurers and HMOS

alike usually rely on the test results reported

by the applicant’s physician. HIV testing is

2
AIDS and Health Insurance: A Survey February 1988

an exception in a few cases: three responding

commercial carriers require an HIV test on

every applicant in areas of high prevalence,

such as New York and California.

Health insurance applicants are rarely

subjected to physical examinations and medical tests. Only 4 percent of applicants to the

responding commercial insurers were required

to have a physical exam or some type of

blood and/or urine test. Just two of the

BC/BS plans require physical exams, and one

requires medical tests for some of its individual applicants. Only three of the HMOS

sometimes require physical exams or medical

tests.

AIDS Policies

Fifty-one (86°h) of responding commercial insurers either screen or plan to screen

individual applicants for HIV infection; 41 do

it currently and 10 plan to. The most common approach is by incorporating questions

in the health history portion of the application. Asking AIDS-related questions is often

less an effective screen than it is an important tool for contesting preexisting condition

claims. If an applicant knowingly misrepresents his or her health condition (e. g.,

HIV seropositivity, recognized symptoms of

AIDS, or fully diagnosed AIDS or ARC), the

insurer may have grounds for denying reimbursement for the condition. An admission

of AIDS, ARC, or HIV seropositivity results

in immediate denial of the application.

Forty-two of these fifty-one companies request a physician statement for selected applicants in order to determine the presence of

AIDS symptoms or other risk factors. The

APS may contain the applicant’s HIV status

as well. HIV testing is also quite common.

Thirty-one companies routinely test individual health insurance applicants for HIV

antibodies; of these, 7 test all applicants, 14

test only those considered to be “high-risk,”

and 10 test according to various criteria (e.g.,

State of residence, medical history, policy

amount, etc.). All those who test use the

ELISA-ELISA-Western blot series. In States

and localities where HIV testing is prohibited,

17 insurers require T-Cell subset studies as a

substitute.

Eleven of the responding BC/BS plans

either screen or plan to screen individual applicants for AIDS exposure; of these, eight

currently do, and three plan to. All eleven

plans ask an AIDS-related question in their

applications. If applicants answer that they

have had or have been treated by a physician

for AIDS or ARC, coverage is denied. As in

the case of the commercial insurers, BC/BS

plans ask about AIDS not only for screening

purposes but also as an important means for

contesting preexisting condition claims. In

addition, nine of the eleven plans sometimes

request an APS to help evaluate an applicant’s

risk for AIDS. Only one plan intends to test

high-risk applicants for HIV infection.

Eight of the fifteen responding HMOS

screen individual applicants for exposure to

the AIDS virus. Three of the plans that do

not are prohibited from doing any medical

screening by State law. All the plans that

screen ask an AIDS-directed question in the

health history portion of their enrollment

form. As in the case of the commercial insurers and BC/BS, an admission of AIDS,

ARC, or HIV seropositivity results in denial

of the application, and the AIDS-related

questions on the application are used not only

to screen, but also to contest preexisting condition claims (where allowed). Six HMOS request an APS to determine the presence of

any AIDS symptoms or other risk factors.

HIV testing of high-risk applicants is done

by only two plans and is under consideration

by a third.

AIDS Claims Experience and Cost

Projections

Forty-five commercial insurers had

reimbursed at least one individua l

policyholder for AIDS-related care. More

than half of the respondents reported 10

AIDS cases or less, while 4 had reimbursed

more than 50 individuals. On average, each

insurer covered the care of 22 AIDS-related

cases. (Of the remaining responding insurers,

3
AIDS and Health Insurance: A Survey February 1988

six reported no AIDS-related cases, 10 were

unable to report their experience, and one

had recently withdrawn from the individual

market.)

Twenty-one insurers provided projections of AIDS-related claims costs for 1987,

forecasting total claims of $11.04 million for

individual health insurance, an average of

$0.53 million per insurer. Two companies

did not expect any AIDS cases in 1987--both

specialize in insurance for seniors--while

four projected costs of $1.3 to $2.3 million

for individual health policies. (Cost projections were not furnished by 40 companies. )

Twenty-two insurers who had received at

least one AIDS-related claim reported linking

no one with a preexisting condition for AIDS;

11 found 1 to 9 percent of cases to be

preexisting; 10 companies, 10 to 50 percent;

and two companies, more than 60 percent.

Ten BC/BS plans reported reimbursing

3,933 subscribers for AIDS-related care, an

average of 393 subscribers per plan (although

one plan alone accounted for 3,000 cases).

(The BC/BS plans’ AIDS case and cost data

reflect both individual and group policy experience.) The seven plans that never hold

open enrollment reported a total of 453

AIDS-related cases, an average of 65 subscribers per plan. Three of these plans are

located in areas of high AIDS prevalence, In

contrast, the three plans that are continuously

open (and thus never screen) reported reimbursing 3,480 subscribers for AIDS-related

care, an average of 1,160 cases per plan.

Two of these plans are in areas of high AIDS

prevalence, and all three have held large

market shares. Only five plans provided 1987

projections of AIDS-related costs. Three

non-open enrollment plans (two are located in

high prevalence areas) forecast a total of

$29.6 million in AIDS-related claims for

1987. Claims totaling $27 million were

projected by two open enrollment plans; $20

million at one plan alone. Eight of the ten

plans that have identified at least one subscriber with AIDS reported finding that 1 to

more than 50 percent of these subscribers had

a preexisting condition for AIDS. Two of

these plans, both in areas of high AIDS

prevalence, connected more than half of their

AIDS cases with a preexisting condition.

Twelve HMOS reported 1,468 members

with AIDS or ARC, an average of 122 members per HMO. The range varied from none

at two HMOS to 940 patients at one HMO.

(The HMOS’ AIDS case and cost data reflect

their individual and group membership experience. ) Only two HMOS provided projections of AIDS-related costs for 1987. One

plan that had identified 10 cases during the

first 10 months of 1987 forecast total costs of

$750,000 for the year; the other had 11 cases

in the year preceding September 1987 and

forecast total costs of $700,000 for 1987. (An

additional HMO did not project 1987 costs

but estimated that its diagnosed members had

average lifetime costs of approximately

$35,000. ) One HMO, located in a high

prevalence area, reported that more than half

of its individual members with AIDS or ARC

were found to have a preexisting condition.

According to State law and in contrast to the

other insurers, this plan was obligated to provide services for preexisting conditions

(without a waiting period) unless the applicant had deliberately misrepresented his or

her health status before joining the HMO.

The commercials, BC/BS plans, and

HMOS reported similar plans to reduce their

exposure to the financial impact of AIDS.

These include reducing exposure to individual

and small group markets by tighter underwriting guidelines, expanding the use of

HIV and other testing, adding AIDS questions

to the enrollment applications, and denying

applicants with a history of sexually transmitted diseases. Two commercial insurers intend to place dollar limits on AIDS coverage

in new policies, and one is introducing a

waiting period for AIDS benefits. One HMO

intends to withdraw from the individual

health insurance market altogether, and a

commercial carrier reported withdrawing

from the District of Columbia. A BC/BS

plan intends to lengthen the waiting period

for new subscribers with a history of

hepatitis, lymph disease, and mononucleosis,

and two others are expanding their AIDS education efforts.

4
INTRODUCTION

Many insurance texts describe the principles of underwriting and the underwriting

process.

l Yet, there are few or no details on

whom insurers test and what tests they re -

quire. A 1986 survey conducted by the

Health Insurance Association of America

(HIAA) and the American Council on Life

Insurance (ACLI) gathered data on screening

by insurers for infections with the human

immunodeficiency virus (HIV) (9). This survey, however, had two important limitations.

It did not provide a view of HIV testing in

the context of other routine tests required by

insurers, and it included neither Blue Cross

and Blue Shield (B C/BS) plans nor health

maintenance organizations (HMOS), a rapidly

growing health insurance sector.

In an effort to fill this gap, the Office of

Technology Assessment (OTA) conducted a

survey of commercial carriers and BC/BS

plans in July 1987, and a survey of HMOS in

September 1987. Approximately 14.5 million

non-Medicare individuals have health insurance without the benefits of group membership. Commercial carriers insure approximately 9.3 million (3); BC/BS, 4.2 million

(1 4); and HMOS, approximately 1 million

(10,20). These are the principle individuals

that must meet underwriting standards to obtain health coverage, and their insurers were

the focus of the OTA survey.

The survey was developed in cooperation

with HIAA, the national Blue Cross and Blue

Shield Association (BCBSA), and the Group

Health Association of America (G HA A),

respective y. The purpose of the survey was

twofold: 1 ) to collect basic information on

underwriting practices and the use of medical

1 Underwriting is the process by which an insurer

determines whether or not and on what basis it will accept

an application for insurance.

screening by insurers, and 2) to document

how health underwriters have responded to

the AIDS epidemic.

The survey questionnaire varied little

among the three target groups. Terminology

was tailored to each, and some questions were

modified to reflect differences in rating and

enrollment practices. The survey of commercial companies is presented in Appendix A.

Overall, 83 percent of the total group of

commercial carriers, BC/BS plans, and HMOS

that were surveyed responded. Survey

responses are summarized in table 1 and described below.

Commercial Health Insurers

The commercial health insurance survey

was targeted to those firms that sell individual policies. These firms are the principal

health insurers who require some applicants

to undergo diagnostic testing or physical examination.

2 The survey was sent to the 88

largest individual health insurers identified by

the 1985 “Bes t’s L i f e - Health Industry

Marketing Results” (1). These 88 companies

represented 70 percent of the commercial, individual health insurance market. 3 Two in -

surers not found on the Best list but reported

2 Large group health insurers may test, but only in rare

cases of so-called “late applicants.” Late applicants are

employees who are eligible for group health insurance but

choose not to sign up until after the normal enrollment

period. Employees who do not participate when first

eligible may later choose to join when they know they soon

will have a claim. Insurers often require proof of insurability to prevent such adverse selection (8).

3 Market share calculations were based on 1985 direct

premiums earned for collectively renewable, guaranteed

renewable, and all other accident and health insurance.

5
AIDS and Health Insurance: A Survey February 1988

Table 1. --Response to the Survey

Commercial Health Insurers, BC/BS Plans, and HMOS

Commercial

insurers BC/BS plans HMos

Total mailed questionnaires. . . . . . . . . . . 8 8 15 50

REPLIED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 (83%) 15 (loo%) 39 (78%)

fully responded . . . . . . . . . . . . . . . . . . . . . . 62a (70%) 15 (loo%) 1 6

b (32%)

omitted (not relevant). . . . . . . . . . . . . . . 9 (lo%) -- 23 (46%)

company liquidated . . . . . . . . . . . . . . . . . . . 1 -- --

too late for inclusion . . . . . . . . . . . . . . . 1 -- --

NO REPLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (17%) -- 11 (22%)

aOne of the Sixty-two responding companies had recently Withdrawn from the

individual health insurance market and responded only to those questions

concerning small underwritten group policies.

bOne of the Sixteen responding HMOs does not allow individual enrollment but

does accept small underwritten groups.

SOURCE: Office of Technology Assessment, 1988.

elsewhere (18) to be “leaders” in individual

health were included. Two companie s

reported on the Best’s list were never located.

Thus, the survey was sent to a total of 88

companies.

It is important to emphasize that the

companies were selected to target leaders in

individual health rather than group-based insurance . Indeed, many of the survey

participants do not sell small or large group

health insurance or do so on a very limited

basis.

Companies were selected for inclusion in

the survey regardless of HIAA affiliation.

However, letters endorsing the survey were

sent by HIAA, on OTA’S behalf, to their 52

members. Companies providing confusing or

incomplete data were called for clarifications.

Eighty-three percent (73/88) of the commercial insurers responded, although one

response arrived too late for inclusion and

nine companies issued policies that were not

relevant to the intent of the survey (table 1).

These nine companies sold only cancer, intensive care unit (ICU), guarantee issue, or

Medigap policies and were omitted.4 Another

company had been liquidated. Nevertheless,

commercial participation was high; 62 companies (70%) completed the survey in time to

be included in the analysis, representing approximately 57 percent of the commercial,

individual health insurance market (l). (One

company had recently withdrawn from the

individual health market and responded only

to those questions concerning small underwritten group policies.) Response was especially strong among industry leaders. Of

the 25 largest companies in 1985, 19 completed the survey (41% of the market), four

4 Cancer insurance provides coverage only for cancer.

ICU policies cover only stays in hospital intensive care

units. “Guarantee issue” refers to policies sold without

regard to health status. Medigap policies are aesigned as

supplements to Medicare coverage for the elderly.

6
AIDS and Health Insurance: A Survey February 1988

were not relevant to the survey, and two did

not reply.

Three health insurance populations were

defined in the questionnaire: 1) individuals -

those who seek insurance independently and

without any association with an employer or

membership group of any kind (also referred

to as direct pay or non-group in the BC/BS

survey and self-pay in the HMO survey); 2)

individually underwritten groups - those

groups that are too small to qualify for

experience-rating and whose members must

be individually underwritten (referred to interchangeably as small groups); 3) other

groups - employee and other larger groups

that do not require individual underwriting.

Survey respondents were asked to avoid including group conversions to individual

coverage or Medigap policies in their

responses.

The responding companies reported

receiving a total of 2.24 million applications

for individual health insurance each years

The annual volume of applications ranged

from 700 to 325,000. The largest insurers

dramatically overshadowed the others. Although 70 percent of responding companies

process no more than 33,000 applications annually, six firms alone accounted for 1.2 million applications, or more than half the annual volume of the entire group (table 2).

Blue Cross/Blue Shield Plans

There are 77 BC/BS plans nationwide, all

offering some form of individual health

coverage. BC/BS plans often operate under

considerably different conditions from commercial carriers. Some plans hold open enrollment periods, all are regionally based, and

many enjoy significant shares of their local

health insurance market. These factors may

play a pivotal role in underwriting policies.

5 Four of the sixty-two participating insurers did not

provide data on number of applications received annually.

Table 2.--Commercial Health Insurers - Annual

Volume of Applicants for Individual Health Coverage

Average number of Number of Percent of

applicants for companies a

companies

individual policies (n=61)

700-15,000 . . . . . . . . . . . . . . . . . . . 26 43 %

16,000-33,000 . . . . . . . . . . . . . . . . . 17 28

35,000-76,100 . . . . . . . . . . . . . . . . . . 8 13

100,000-325,000 . . . . . . . . . . . . . . . . 6 10

Not available . . . . . . . . . . . . . . . . . . 4 7

Total . . . . . . . . . . . . . . . . . . . . . . . . . 61 100 %

a

Percentages may not total 100 due to rounding.

Source: Office of Technology Assessment, 1988.

Twenty-four plans (31°h), four according

to State mandate, accept anyone who applies

for individual coverage, regardless of health

status, during certain periods of the year.

Seventeen (22°/0) of these “open enrollment”

plans are termed “continuous, ” because they

accept all applicants throughout the year (12).

The implications for the underwriting process

are significant. Because no individual standards of insurability are applied to open enrollment applicants, there is considerable adverse selection. In other words, people with

poorer than average health expectations are

more likely to apply for insurance than those

with average or better health expectations.

Most plans attempt to hold down premium

rates for open enrollment subscribers by

providing less comprehensive benefits relative

to medically underwritten applicants. Others

require open enrollment subscribers to pay

higher premiums than underwritten applicants

for identical coverage. Open enrollment

coverage of high-risk applicants usually

entails waiting periods before initial benefits

may be paid and may impose limitations on

coverage of preexisting conditions.

7
AIDS and Health Insurance: A Survey February 1988

Even though open enrollment plans never

deny an application, applicants may be required to furnish evidence of their health

status, including an attending physician’s

statement (APS). Individuals enrolling in an

open enrollment program often have the option of undergoing medical underwriting, and

ven a physical exam, to determine whether

they qualify for a more comprehensive

benefit package at a preferable rate. In addition, health information may be required by

the underwriter to develop benefit limits, exclusion riders, waiting periods for preexisting

conditions, or premium rates.

Unlike commercial insurers, the BC/BS

plans are regional and do not sell coverage

outside a particular State, metropolitan area,

or region. This has particular significance vis

a vis AIDS, not only because of the disproportionate effect of the epidemic on

certain locales, but also because of State and

local regulations on screening for HIV infection.

The market share of many BC/BS plans,

though decreasing in recent years, has historically overshadowed that of any individual

Table 3.--Characteristics of the 15 Responding

Blue Cross/Blue Shield Plans

Plan characteristic Number of plans

(n=15 )

a

In an area of high

AIDS prevalence . . . . . . . . . . . . . . . . . . . . . 5

Significant market shareb

(more than 38% share) . . . . . . . . . . . . . . . 7

In a competitive market

(20-31% share) . . . . . . . . . . . . . . . . . . . . . . 8

Offers continuous open enrollment . . . . . . 4

~ Some plans appear in more than one category.

Market share data come from P. Fanara and W.

Greenberg, “The Impact of Competition and

Regulation on Blue Cross Enrollment of NonGroup Individuals,” The Journa lof of Risk and

Insurance, pp. 188-9, June, 1985.

c An additional plan holds open enrollment, but it

is limited to certain months of the year.

Source: Office of Technology Assessment, 1988.

commercial carrier. In some States, as much

as half the population may be BC/BS subscribers. Such a secure market position can

shape underwriting policies and allow a plan,

for example, to enroll high-risk applicants.

Fifteen plans were selected for the OTA

survey and were chosen to ensure representative geographic distribution, variations in

market share, location in areas of low and

high AIDS prevalence, and differing policies

regarding open enrollment (table 3). The

survey was sent to the plans, on OTA’S behalf, by the national Blue Cross and Blue

Shield Association along with a letter of

endorsement. All 15 plans completed the

questionnaire. Plans providing confusing or

incomplete data were called for clarifications.

The commercial questionnaire wa s

adapted for the BC/BS plans to include

appropriate terminology and address BC/BS

open enrollment and underwriting practices.6

Health Maintenance

Organizations

HMOS are health care organizations that

provide comprehensive services to enrolled

members for a fixed, prepaid amount that is

independent of the number of services actually used. As of March 1987, there were

654 HMOS in the United States, with enrollment exceeding 27.7 million members, or

more than 10 percent of the U.S. population.

HMO growth has been phenomenal. From

1981 to 1986, average annual enrollment increased 20 percent, while the number of

plans increased by 48 percent. Thirty-four

new plans started in the first three months of

1987 alone (1 1).

6 References to “individual coverage” were replaced by

“non-group/direct pay” coverage to reflect BC/BS

terminology. Plans were asked to verify whether they offered continuous or non-continuous open enrollment,

Question 11.B. in the commercial insurers survey (see Appendix A), which concerns the importance of non-medical

underwriting factors, was split into three parts, focusing on

the actual proportion of BC/BS applicants affected by

medical as well as non-medical underwriting factors.

8
AIDS and Health Insurance: A Survey February 1988

By assuming not only the insurance risk

but also the responsibility for providing their

members’ health care, HMOS operate under

significantly different conditions from either

BC/BS plans or commercial carriers. Another

important distinction is that while commercial

insurers and BC/BS plans are governed solely

by State regulations, many HMOS voluntarily

adhere to Federal qualification standards as

well. 7 More than half the nation’s HMOS are

federally qualified, and 80 percent of HMO

enrollment is in federally qualified plans (1 1).

Federal qualification shapes HMO insurance

practices including rate-setting, risk classification, coverage, preexisting conditions, and

waiting periods. It requires that if an HMO

accepts non-Medicare individual members,

they must be either accepted at a community

rate or rejected altogether. Exclusion riders

and rated premiums are prohibited. In addition, benefits for preexisting conditions must

be available upon enrollment because waiting

periods are not allowed .

8 Medical screening

of individual applicants is permitted, however.

State HMO regulation varies. While some

States give HMOS considerable latitude with

respect to nongroup underwriting, others are

more restrictive than the Federal HMO Act.

Minnesota, for example, allows medical

screening, exclusion riders and experiencerating (22). In contrast, Ohio forbids medical

screening of nongroup applicants during a

mandated 30-day open enrollment period

each year (21).

Most industry experts believe that individual enrollment in HMOS is rare. The

Group Health Association of Americ a

estimates that no more than 4 percent of nonMedicare HMO members enroll as individuals

(20). Many of these “self-payers” are “conversions” (i.e., former group members who

have converted to individual enrollment because of a change in employment or marital

status). Both the Federal HMO Act Regulations (42 CFR 417.108(e)) and The Consolidated Omnibus Budget Reconciliation Act

of 1985 (COBRA) (Public Law 99-272)

mandate that HMOS allow group members to

convert to individual enrollment without

providing evidence of insurability.

No national database identifies the HMOS

that accept self-paying individuals. Because

OTA was not able to ascertain which HMOS

accept individual enrollment, the survey

questionnaire was sent to the 50 largest local

and national HMOS to first inquire whether

the organization enrolled individuals other

than on a conversion basis and, if so, to request that the HMO participate in the sur- vey 9,10 Endorsement letters from GHAA .

were enclosed with the survey. Plans providing confusing or incomplete data were called

for clarifications.

More than three-quarters of the HMOS

(39/50) responded. Sixteen (320/o) reported

that they met the survey requirements; of

these, 15 (30°/0) accepted nongroup individuals

(i.e., on a non-conversion basis) and eight

(16°/0) underwrote small group members.

(Note that one of the 16 responding HMOS

does not allow individual enrollment but does

accept individually underwritten groups. )

The fact that close to one-third of the 50

largest HMOS enrolled non-conversion individuals indicates that HMOS may be playing a

greater role in the individual health insurance

market than previously believed.

7 The federal Health Maintenance Organization Act of

1973, aa amended (42 U.S. C. Sec. 300e et seq.), created an

HMO office within the Department of Health and Human

Services to regulate HMOS through qualification and

ongoing compliance requirements. In order to become

federally qualified, HMOS must meet certain financial, underwriting, and rate-setting standarda and provide

specified medically necessary health services (6).

8 However, if an HMO applicant knowingly misrepresents

his or her state of health, the plan may have grounds to

terminate membership.

g The surveyed planu were selected from “The Interstudy

Edge” report of HMO membership as of March 31, 1987.

Note that many of the 50 largest HMOS are national firms

that may include as many aa 37 local plans.

10 The HMO survey instrument differed from the commercial questionnaire in several ways. Plans were asked if

the HMO (1) accepted self-paying individuals other than

on a conversion basis; (2) was federally qualified or had a

non-federally qualified subsidiary; (3) offered continuous

or non-continuous open enrollment; and (4) had individually underwritten groups, community-rated groups, or

experience-rated groups. In addition, some terminology

was changed to reflect HMO practice.

9
AIDS and Health Insurance: A Survey February 1988

The 16 plans that completed the survey

had a total of 9.2 million members and onethird of the nation’s total HMO membership.

Membership for these HMOS ranged from

110,000 to more than 4.9 million; several

were national firms that included from 6 to

24 local plans. The 23 HMOS that responded

to OTA’S letter but accepted neither nonconversion individuals nor underwritten

groups had a total of 6.5 million members

(1 1). Other responding plan characteristics

are summarized in table 4.

Although the responding HMOS represent

a substantial share of the national HMO

membership, these older, established, and

very large organizations are not necessarily

representative of younger plans and recent

entrants into the market. Small, young HMOS

are less likely to enroll individuals, be

federally qualified, or operated on a not-forprofit basis (1 1).

Table 4.--Characteristics of the 16 Responding HMOS

HMO characteristic Number of HMOS Percent

(n=16) of HMOs

Federally Qualified (FQ)......... 9 56 %

FQ with non-FQ subsidiary . . . . 3 19

Model Type

Network . . . . . . . . . . . . . . . . . . . . . . . . . . 7 44 %

IPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 31

Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 19

Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 6

Membership Types Accepted

Self-Pay Individuals . . . . . . . . . . . . 15 94 %

Individually

Underwritten Groups . . . . . . . . 8 50

Community-Rated Groups.. 16 100

Experience-Rated Groups.... 4 25

Source: Office of Technology Assessment, 1988.

10
SURVEY RESULTS

Medical and Other Factors

in Risk Classification

Commercial Health Insurers

The outcome of underwriting is risk

classification, the final evaluation of whether

the proposed insured will be covered on a

“standard” or “substandard” basis, or not at all.

Insurers were asked to list those conditions or

impairments that they exclude from coverage,

“rate-up” (i. e., require a more costly

premium), or consider uninsurable. In general, the companies take a very similar approach to classifying risk. However, there

are differences; some medical conditions or

impairments that make the applicant wholly

uninsurable by one insurer may just be excluded from coverage or rated-up by another.

For example, although some companies are

unwilling to underwrite applicants with any

history of diabetes, others decline only juvenile diabetics and insure but exclude diabetes

for other diabetic applicants. In some cases,

severity of the condition is key. For example, if hypertension is controlled and moderate, a rated premium (i. e., more expensive)

may be offered; if the hypertension is uncontrolled or severe, the applicant may be

denied coverage altogether (table 5).

Most applicants for individual health

coverage are classified as standard and can

purchase insurance protection without extra

premiums or special limitations. Threequarters of the responding insurers (46/61)

provided standard coverage to at least 60 percent of their individual applicants. In total,

the responding insurers reported selling approximately 1.5 million new standard policies

each year; 73 percent of their individual applicants are classified as standard (tables 6

and 7).

Substandard policies include an exclusion

waiver, a rated premium, or both. About

413,000 individual applicants were offered

coverage on this basis by the responding insurers, or 20 percent of completed applications.

Exclusion waivers may temporarily or

permanently exclude a medical condition

from coverage. The exclusion may be for a

specific condition, such as gallstones, or for

an entire organ system, such as reproductive

disorders. Permanent waivers usually exclude

from coverage chronic conditions that are

moderately costly and without life -

threatening implications. Temporary waivers

generally involve acute conditions that are

short-term in nature, such as fractures or

some minor surgery. More than half of the

responding insurers (35/6 1 ) reported that 1 to

19 percent of their individual applicants carry

an exclusion waiver. Thirteen (21°/0) required

exclusions for 20 to 39 percent of their applicants (table 6).

Thirty-five insurers (57%) reported that

the increased risk associated with 1 to 19

percent of their applicants required a rated

premium. The additional premiums usually

range from 25 to 100 percent of the standard

premium, although some insurers will use

higher ratings (7). Thirteen companies (21°/0)

never rate-up applicants. Rated conditions

do not differ significantly from those that insurers may exclude; in general, higher premiums are required for chronic but moderately

severe conditions (e.g., asthma, glaucoma).

Whether a condition is excluded or rated is a

matter of company pricing policy and strategy. Sometimes the insurer does both.

11
AIDS and Health Insurance: A Survey February 1988

2

w

G

o

G

o

E!

5

.

~

*I-I

6

i?

Q

12
AIDS and Health Insurance: A Survey February 1988

Table 6--- Commercial Health Insurers

Risk Classification of Individual Applicants

Percent of Number of Percent of

applicants companies companies

(n=61)

StARDARD

Never Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 39%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 to 59% . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 to 79%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 100%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not Available. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUBSTANDARD

Exclusion Waiver

Never Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 39%... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 to 592. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 to 79%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 100%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not Available. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rated Premium

Never Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ., . . . . . . .

1 to 19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 39%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 to 59%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 to 79%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 100%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not Available. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exclusion Waiver

and Rated Premium

Never Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 39X. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 to 59%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 to 79%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 100%.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not Available. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Never Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to 19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 to 39%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40 to 59%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

60 to 79%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

80 to 100%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Not Available. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0

0

1

7

26

20

7

G

3

35

13

1

0

0

9

E

35

3

0

0

0

10

E

16

33

1

0

0

0

11

G

1

52

1

0

0

0

~

61

--

--

2%

11

43

33

11

1’0%

5%

57

21

2

.-

--

15

1370%

13 21%

57

5

--

--

--

16

ITO%

26%

54

2

--

--

18

ITO%

2%

85

2

--

--

-.

11

ITO%

SOURCE: Office of Technology Assessment, 1988.

13
AIDS and Health Insurance: A Survey February 1988

Most of the responding insurers (56%)

noted that some policies may require an exclusion and rated premium, 1 to 22 percent

of applicants are underwritten this way.

Eight percent of individual applicants

were denied coverage by the responding insurers; approximately 164,000 individuals

each year. Most companies (54°/0) deny

coverage to less than 10 percent of their applicants; 31 percent deny coverage to between

10 and 19 percent. Coverage may be denied

for serious medical reasons or “because an applicant is clearly outside a particular company’s parameter of acceptable risks for occupational or financial reasons” (7). Most insurers deny any applicant whose probability

of disease exceeds three times the average for

his sex and age.

Insurability is not just a matter of health

status; several factors are key to the underwriter’s decision to deny an application, to

exclude a condition, or to rate up an applicant. The survey results indicate that other

factors besides ill health can seriously hamper

access to health coverage for nongroup individuals and their family members (table 8).

When asked to indicate which nonmedical underwriting factors could affect an

application’s acceptance, commercial insurers

most commonly cited dangerous health habits

(e.g., drug abuse), illegal or unethical behavior (e. g., criminal business practices), age,

and occupation.

Drug abuse, and other health endangering habits, perhaps better categorized as significant predictors of health status, were considered of critical importance by 57 (93%)

responding companies; indeed, many emphasized that drug abusers are uninsurable.

Nearly three-quarters (44/61 ) of those

responding also considered “illegal or unethical behavior” incompatible with insurability.

This probably reflects the great sensitivity of

the industry to fraud. Age and occupation,

though reported by roughly one-third to be

key to a proposed insured’s acceptance or rejection, were more often noted to influence

coverage limits or premiums.

Healthy habits, such as non-smoking,

were rated “important” by more than half of

the insurers (34/61), an indication of the increasingly common use of premium credits

for non-smokers. Dangerous avocations, such

as race car driving or hang gliding, were considered either “very important” or “important”

to almost 80 percent (48/61) of those surveyed. Rather than deny coverage to applicants with risky hobbies, most underwriters

choose to limit only the insurer’s responsibility for related accidents.

The survey results also show that financial status plays a key role in health insurance

underwriting. Sixteen percent (10/61) of

those responding said financial factors alone

could affect acceptance of an application; another 43 percent (26/61) considered it “important” to coverage limits and premium

Table 7.--Commercial Health Insurers

Estimate of Industry-Wide Risk Classification

of Individual Applicants

Total number

of applicants

Risk per year Estimated

classification (n=S3) a

proportion

Standard . . . . . . . . . . . . 1,525,472 73 %

Substandard . . . . . . . . . . 412,505 20

Exclusion Waiver . . . 270,373 13

Rated Premium . . . . . . 108,293 5

Waivered & Rated Up . 93,839 2

Denied . . . . . . . . . . . . . . . 164,317 8

TOTAL

APPLICATIONS . . . . . . . . 2,102,294 100 %

 Data were not provided by 8 of 61 insurers.

The percentages in Column 2 were derived by

dividing column 1 by 2.1 million. Also, percentages may not total 100 due to rounding.

Source: Office of Technology Assessment, 1988.

14
AIDS and Health Insurance: A Survey February 1988

In

0-)

Q

4

d

d

m

u

m

mm

mu

la

N

N

4

I

I

0

in

m

Ii

m

4JH

m

15
AIDS and Health Insurance: A Survey February 1988

levels. Some insurers may establish minimum

income requirements for certain types of

medical expense policies in order to avoid

early lapses caused by the insured’s inability

to afford the premium (7).

Many respondents reported requiring

financial and personal investigations. (See

“Sources of Medical Information,” table 15. )

Although 25 percent (15/61) of the respondents never require an investigation, 16 percent (10/61) investigate one-fourth or more

of their applicants. Two companies reported

that financial or personal checks are done on

every individual applicant. Most commonly,

these inspections are credit and motor vehicle

record checks, but insurers also rely on inspection agencies to verify health information

reported in the application and even information on sexual orientation (see below).

Although close to 40 percent (24/61) of

the commercial insurers never use place of

residence in underwriting, more than onequarter (16/61 ) consider it very “important”

or “important. ” Another 34 percent (21/61)

reported that residence may influence underwriting determinations when considered in

conjunction with other more important risk

factors. Several carriers noted that their concern over place of residence was due to insurance fraud that was known to occur in

certain localities. Others indicated that use of

place of residence in setting premiums is a

result of regional variations in health care

costs. Among the 31 respondents who tested

for exposure to the AIDS virus, three (10%)

required HIV screening of all applicants

residing in areas of high AIDS prevalence.

Seventy percent (43/61 ) of the respondents indicated that sexual orientation is

never used in underwriting. However, contrary to the 1987 National Association of Insurance Commissioners (NAIC) guidelines

(16) recommending against using sexual

orientation in underwriting, five companies

considered it “very important” or “important”

(i.e., affecting coverage, premiums, or possibly acceptance), and another 13 ranked it as

“unimportant” (i.e., not affecting insurability

unless present with other more important factors). 11 In addition, three companies reported

requesting an APS or physical exam based on

sexual orientation.

It is unclear how insurers ascertain an

applicant’s sexual preference. Most (48/61)

of the respondents provided samples of their

health insurance applications, none of which

included any questions concerning sexual

orientation or lifestyle. One manager of a

firm which specializes in insurance paramedical exams reported seeing references to an

applicant’s homosexuality in attending

physician statements. Three insurers, in conversations with OTA, noted using indirect

approaches or inspection agencies to confirm

“suspicions of homosexuality” by, for example, interviewing a proposed insured’s neighbors.

Blue Cross/Blue Shield Plans

Although BC/BS plans do not screen for

high-risk applicants as exhaustively as do

commercial carriers, the risk classification

that is used once a high-risk applicant is

identified varies little from the approach used

by commercial carriers. Medical conditions

that commonly require a rated premium, exclusion waiver, or are wholly uninsurable by

commercial insurers are similarly classified by

the non-open, responding plans (see table 5).

Open enrollment programs do not classify

applicants by risk in the usual sense, although

they typically provide fewer comprehensive

benefits and may require open enrollment

subscribers to pay higher premiums than

other applicants for identical coverage. Open

enrollment coverage usually requires waiting

periods before initial benefits may be paid

for preexisting conditions and may exclude

preexisting conditions.

11 In July 1987, the NAIC issued a proposed bulletin

stating that “sexual orientation may not be used in the

underwriting process or in the determination of insurability.” At least eight States (Colorado, Delaware,

Florida, Iowa, Oregon, South Dakota, Texas, and Wisconsin) have barred using sexual orientation in underwriting or in the determination of insurability,

premiums, terms of coverage, or renewals (16).

16
AIDS and Health Insurance: A Survey February 1988

Fourteen of fifteen responding plans

reported receiving a total of 401,500 nongroup applications annually .12

Most applicants for direct pay (i.e., individual) coverage are classified as standard.

Thirteen plans (86°/0) provided standard

coverage to 60 to 100 percent of their nongroup applicants; the other two plans classified 40 to 59 percent as standard (table 9).

In total, respondents reported selling approximately 332,000 new nongroup standard

policies each year. Eighty-three percent of

their individual applicants were classified as

standard (table 10).

Each year about 37,000 nongroup applicants are offered substandard coverage by

the responding plans (9 percent of those completing applications). Exclusion riders, rather

than rated premiums, are more commonly

used in direct pay policies. Eight plans

reported requiring an exclusion for up to 39

percent of their nongroup applicants, while

only four plans charged higher premiums for

less than 20 percent of applicants. One continuous open enrollment plan required exclusion riders for 27 percent of its applicants.

The respondents (open and non-open

combined) refused coverage to 8 percent of

their direct pay applicants. Denial rates

range from zero (for open enrollment plans)

to thirty-five percent (table 9).

Underwriting by BC/BS plans appears to

be considerably less complex than that done

by the commercials. Not only is medical

evaluation of applicants much less exhaustive,

but also far fewer factors are weighed. The

survey questionnaire asked the plans to try to

quantify the effects of a number of factors

on an applicant’s insurability, i.e., to estimate

the proportion of applicants who are either

denied coverage or offered only limited

coverage or an increased premium because of

medical condition, age, poor health habits,

place of residence, etc. (table 11).

The responses to these questions indicate

that BC/BS insurability is almost purely a

question of medical condition. All but the

four continuous open enrollment plans reject

some applicants in poor health, wit h

medically-based denial rates ranging from 7

to 33 percent. Close to half the plans (7/15)

also reported denying nongroup applications

because of alcohol or drug abuse histories

(table 11).13

In many BC/BS plans, regardless of open

enrollment policy, any known existing disease

or impairment, whether acute or chronic, may

not be covered, or a waiting period may be

required. Nine of the 15 plans (60°/0) used

such limits because of the medical condition

of 5 to 27 percent of their applicants.

Nearly three-quarters (1 1/15) of the

responding plans never “rate-up” direct pay

premiums because of medical condition. Of

the four plans that do, 2 to 19 percent of

their individual applicants are affected. All

the nongroup premium rates are age-based at

four plans and affected by place of residence

at two plans (i.e., because of regional variations in health costs.) More than half the applicants at two other plans are given nonsmoker discounts.

No BC/BS plan reported using sexual

orientation in underwriting. However, one

plan did originally report modifying nongroup premiums on this basis (for 3 percent

of their applicants). When questioned by

OTA as to how sexual orientation is

identified, the plan underwriter explained

that they had interpreted the term to mean

sex (i.e., male or female).

Only one respondent requested routine

financial or personal investigations, inspecting

10 percent of its applicants for nongroup

coverage (See “Sources of Medical Information,” table 15.).

12 One plan did not furnish relevant application data.

13 BC/BS plans may deny coverage to applicants residing

outside their service area.

17
AIDS and Health Insurance: A Survey February 1988

Table 9 . --Blue Cross/Blue Shield Plans

Risk Classification of Individual Applicants

Percen t Number Percent

of applicants of plans of plan s

a

(n==15)

STANDARD

Never

1 to

20 to

40 to

60 to

80 to

Total .

Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39x. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUBSTANDARD

Exclusion Waiver

Never

1 to

20 to

40 to

60 to

80 to

Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

792. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rated Premium

.-Never Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 to

20 t o

40 t o

60 t o

80 t o

Total.

REJECTED

Never

1 to

20 t o

40 t o

60 t o

80 t o

Total.

19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59x. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

792. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Used. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

39%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

792. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IOO%. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0 --

0 --

0 .-

2 13%

8 53

~ 33

15 100%

7

6

2

0

0

—0

15

11

4

0

0

0

0

15

47%

40

13

--

- -

- -

100%

73

27

- -

- -

- -

- -

100%

3 20%

7 47

5 33

0 --

0 --

0 --

15 100%

a

Percentages may not total 100 due to rounding.

SOURCE: Office of Technology Assessment, 1988.

18
—

AIDS and Health Insurance: A Survey February 1988

Table 10. --Blue Cross/Blue Shield Plans

Estimate of Industry-Wide Risk Classification of Individual Applicants

Total number of

Risk classificatio n applicants per yea r

a

Estimated proportion

(n=14) (column 1 + 401,475)

Standard. . . . . . . . . . . . . . . . . . . . . . . . . . 331,560 83%

Substandard. . . . . . . . . . . . . . . . . . . . . . . 36,949 9

Exclusion waiver. . . . . . . . . . . . . . . . 23,660 6

Rated premium. . . . . . . . . . . . . . . . . . . 13,289 3

Denied b. . . . . . . . . . . . . . . . . . . . . . . . . . . 32,966 8

TOTAL

APPLICATIONS. . . . . . . . . . . . . . . . . . . . . . 401,475

aData were not provided by one continuous open enrollment plan.

bDenials occur only at non-open enrollment plans; on average, these plans

reject 19 percent of their applicants.

SOURCE: Office of Technology Assessment, 1988,

Health Maintenance Organizations

HMO risk classification often differs

from the traditional commercial and BC/BS

insurers’ approaches. Federally qualified

plans are restricted to either accepting nonMedicare applicants at a community rate or

denying membership altogether. Exclusions,

rated premiums, and waiting periods are

prohibited. Some States have similar requirements. However, HMO underwriting does

reflect traditional practice with respect to

medically uninsurable conditions. The

responding HMOS were no more willing to

underwrite high-risk applicants than the

commercial insurers or BC/BS plans. When

asked which conditions the HMO considered

uninsurable, the plans’ responses mirrored

those given by the traditional insurers (see

table 5).

In total, 12 of 15 HMOS reported receiving approximately 57,900 self-pay (i.e., individual) applications each year and enrolling

73 percent on a standard basis. Standard acceptance rates ranged from 49 percent at one

plan to 100 percent at two plans required by

State law to hold open enrollment (tables 12

and 13).14

Only two HMOS (13%) reported enrolling

individual members on a substandard basis;

both required exclusion waivers for 10 to 15

percent of their applicants. (One of these

plans was not federally qualified, the other

was but had a non-federally qualified subsidiary.)

14 Statistics for some national plans may represent only

one locale.

19
AIDS and Health Insurance: A Survey February 1988

Oz

No

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84

ho

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*tx-Yul-loul 1+ U-)ooun

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l-l

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0

0

l-i

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w

0 5’

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d

0

a

L1

20
AIDS and Health Insurance: A Survey February 1988

Table 12. - -Health Maintenance Organizations

Risk Classification of Individual Applicants

Percent Number Percent

of applicants of HMos of HMosa

(n-15)

STANDARD

Never

1 to

20 to

40 to

60 t o

80 t o

Used. . . . . . . . . . . . . . . . . . . . . . .

19%. . . . . . . . . . . . . . . . . . . . . . .

392. . . . . . . . . . . . . . . . . . . . . . .

59%. . . . . . . . . . . . . . . . . . . . . . .

792. . . . . . . . . . . . . . . . . . . . . . .

IOO%. . . . . . . . . . . . . . . . . . . . . . .

Not Available. . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUBSTANDARD

Exclusion Waiver

Never Used. . . . . . . . . . . . . . . . . . . . . . .

1 to 19%. . . . . . . . . . . . . . . . . . . . . . .

20 to 39%. . . . . . . . . . . . . . . . . . . . . . .

40 to 59%. . . . . . . . . . . . . . . . . . . . . . .

60 to 79%. . . . . . . . . . . . . . . . . . . . . . .

80 to 100%. . . . . . . . . . . . . . . . . . . . . . .

Not Available. . . . . . . . . . . . . . . . . . . .

Total. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rated Premium

Never Used. . . . . . . . . . . . . . . . . . . . . . .

Not Available. . . . . . . . . . . . . . . . . . . .

Total.. . . . . . . . . . . . . . . . . . . . . . . . . . .

REJECTED

Never Used. . . . . . . . . . . . . . . . . . . . . . .

1 to 19%. . . . . . . . . . . . . . . . . . . . . . .

20 to 39%. . . . . . . . . . . . . . . . . . . . . . .

40 to 59%. . . . . . . . . . . . . . . . . . . . . . .

60 to 79%. . . . . . . . . . . . . . . . . . . . . . .

80 to 100% . . . . . . . . . . . . . . . . . . . . . . .

Not Available. . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .

o

0

0

1

6

6

2

15

11

2

0

0

0

0

2

15

- -

- -

- -

7%

40

40

13

100%

73%

13

- -

- -

- -

- -

13

100%

87%

13

100%

2 13%

1 7

9 60

1 7

0 --

0 --

2 13

15 100%

a

Percentages may not total 100 due to rounding .

SOURCE: Office of Technology Assessment, 1988.

21

81-968 0 - 88 - 2
— .

AIDS and Health Insurance: A Survey February 1988

Table 13 .--Health Maintenance Organizations

Estimate of Industry-Wide Risk Classification

of Individual Applicants

Total number Estimated

Risk of applicants proportion

Classification per year

(n=12 )

a

Standard . . . . . . . . . . . 42,401 73%

Substandard . . . . . . . . . . 1,815 3

Ridered . . . . . . . . . . . 1,815 3

Denied . . . . . . . . . . . . . . 13,653 24

TOTAL

APPLICATIONS . . . . . 57,869

aData were not provided by three HMOS.

bThe percentages in Column 2 were derived by

dividing column 1 by 57,869.

Source: Office of Technology Assessment, 1988.

Rejection rates for the responding HMOS

were high relative to the commercial and

BC/BS insurers. Eleven of fifteen HMOS

denied membership to 20 to 59 percent of

their individual applicants. In total, 12

responding HMOS refused membership to approximately 13,700 self-pay applicants annually, 24 percent of their self-pay applicants. In contrast, the commercials and

BC/BS plans both denied 8 percent of selfpay applicants. It may be that HMOS receive

a greater proportion of high-risk applicants

because of their comprehensive coverage and

community rating practices. In addition, the

Federal qualification requirements and State

regulations that restrict HMO use of exclusions and rated premiums may limit the

ability of the plans to underwrite many individuals. Clearly, further study is warranted

in order to understand these differences.

Access to HMO self-pay membership is

fundamentally a matter of health status. All

but three of the respondents (81%) reported

that medical conditions can affect either the

applicant’s acceptance, premium rate, or

scope of benefits. The three plans that never

consider the applicant’s health are located in

a State that mandates HMOS to hold an annual 30 day open enrollment period (without

medical screening); due to possible adverse

selection, this is the only time these HMOS

are willing to enroll individuals (table 14).

Age, type of occupation, health enhancing behavior (e.g., non-smoking), and sexual

orientation are also considered key to insurability by 19 percent or more of the

respondents. It is not clear how sexual

orientation is identified by the four plans that

use it in underwriting. No surveyed plan

reported using personal inspection agencies,

and none of the provided enrollment applications included any relevant lifestyle questions.

The National Association of HMO Regulators

(NAHMOR), which serves a role similar to

that of the NAIC, has not yet taken a position on the appropriateness of using sexual

orientation in underwriting (1 5). (See previous discussion of the NAIC recommendations.)

Sources of Medical Information

Commercial Health Insurers

The underwriter’s objective is to know as

much about the applicant’s health status as

the applicant. Any health insurance policy

based on medical underwriting requires the

applicant (and each family member) to complete a health history questionnaire. As evidenced by the survey responses, company

policies vary considerably with respect to the

proportion of applicants required to provide

further evidence of their health status, either

via an attending physician statement, physical

exam, blood and urine tests, and/or financial

or personal investigations (table 15).

22
AIDS and Health Insurance: A Survey February 1988

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AIDS and Health Insurance: A Survey February 1988

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24
AIDS and Health Insurance: A Survey February 1988

Attending Physician Statements. Beyond the

health data provided directly in the insurance

application, the APS is the most common

supplemental source of medical underwriting

information. Overall, the responding insurers

reported requiring an APS for 20 percent of

their individual applicants, a total of 446,000

physician statements each year. The APS is

also clearly the insurer’s principal source of

testing data, since it often includes recent test

results as well as X-rays, electrocardiograms,

and pathology reports. (The APS usually

consists of a standard form completed by the

applicant’s doctor. However, physicians

sometimes send the insurer a photocopy of

the applicant’s medical record instead.) Although close to two-thirds of the respondents

(38/61) require physician statements of 20 to

79 percent of their individual applicants,

more than three-quarters (47/61 ) test only 5

percent or less. Therefore, testing done at

the physician’s request appears to be as critical to insurability as tests ordered by the insurer (tables 15 and 16).

There are a number of factors that lead

the underwriter to require an APS. These are

listed, in table 17, along with the number of

survey respondents who use them as routine

APS “triggers.” The medical history revealed

in the insurance application is the most common trigger; it was cited by every responding

company that ever requires an APS. Seventy

percent indicated that reports from the Medical Information Bureau (MIB), a databank of

underwriting information shared by commercial insurers,ls

routinely trigger APS requests;

65 percent, that inspection reports (i.e., background checks) triggered a request for an

APS; and 78 percent, that a history of drug

abuse triggered APS requests. Older applicants are commonly required to provide

further evidence of good health; 57 percent

of the companies reported that APS requests

are age-based. It is not surprising that older

15 The MIB is a non-profit association of more than 700

life and health insurere established in 1905 to facilitate

sharing of underwriting information. Participating insurere

report each applicant’s significant medical findings (including test results) to the MIB and also routinely consult

the MIB databaee for any relevant underwriting information on their current applicants.

applicants are more closely scrutinized, as

they are more likely to have health problems

that are not reported on the application (7).

As noted earlier, three companies reported

using sexual orientation as a basis for requiring an APS.

Other reasons cited for requiring an APS

included policy amount, blood transfusion

before 1985, height/weight, previous claims

history, occupation, and being uninsured for

an extensive period.

Physical Exams. Physical examinations of

insurance applicants are much less common.

Overall, only 4 percent of individual applicants were examined each year by the

respondents, less than 94,000 nationwide.

Seventeen (28%) of the 61 responding companies never require physicals for individual

applicants. However, 15 (25%) did require at

least 1 out of 10 applicants to be examined

by a physician or paramedical professional.

In one company, every applicant must pass a

physical; in another, 80 percent (tables 15 and

16).

The reasons insurers cite for ordering a

physical exam closely mirror those for requiring attending physician statements. In addition, APS findings themselves often lead the

underwriter to request an exam for further

clarification of the proposed insured’s medical

condition (table 17).

Blood and Urine Screening. HIV screening

may be the most discussed test, but it is only

one of many tests ordered by underwriters.

Among the responding insurers who do test,

standard panels of blood chemistries and

urinalyses are most common. These standard

panels of tests are characteristic of those

commonly ordered by physicians as part of a

general physical evaluation. In addition to

the panels, many insurers reported ordering

urine screens for drugs of abuse--such as

cocaine and barbiturates- -as well as for

nicotine and prescription medications for

diabetes, heart disease, and hypertension.

The insurer’s interest in prescription medication is twofold; first, to “catch” applicants

who are less than straightforward in their

25
AIDS and Health Insurance: A Survey February 1988

Table 16--- Individual Underwriting by Commercial Health Insurers

Annual Volume of Attending Physician Statements, Physicals, and Testing

Total number Proportion of

per year

a

individual applicants

(column 1 ÷ 2.21 million)

Attending Physician Statement (APS). . . . . . . . . . . . . . 445,736 20%

Physical Exam. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,725 4

Blood or Urine Screen . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,747 4

a

Only those 56 companies that provided data in all three categories (i.e.,

APS, physical exams, and screens) are included. b

The 56 insurers included in this analysis reported a total volume of 2.1

million individual applications annually.

cBlood and urine screening data do not include HIV screening.

SOURCE: Office of Technology Assessment, 1988.

Table 17--- Individual Underwriting by Commercial Health Insurers: Reasons for

Requiring An Attending Physician Statement or Physical Exam

Attending physician

statement (APS)a

Physical examb

(n=60) (n=47)

Reasons for requiring Number of Percent of Number of Percent of

an APS or physical exam Companies Companies Companies Companies

Diagnosis Reported on Application . . . . . . . . 60 100% 42 89%

Attending Physician Statement (APS). . . . . . -- --- 44 94

Medical Information Bureau Report (MIB).. 42 70 33 70

Drug Abuse History . . . . . . . . . . . . . . . . . . . . . . . 47 78 25 53

Inspection Report, . . . . . . . . . . . . . . . . . . . . . . . 39 65 29 62

Age, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 57 22 47

Late Group Applicant . . . . . . . . . . . . . . . . . . . . . 12 20 4 9

Geographic Area. ., ..., . . . . . . . . . . . . . . . . . . . 4 7 1 2

Sexual Orientation. . . . . . . . . . . . . . . . . . . . . . . 3 5 2 4

Sex. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 0 0

Other, including: . . . . . . . . . . . . . . . . . . . . . . . . 16

Policy Amount . . . . . . . . . . . . . . . . . . . . . . . 3

Height/Weight. . . . . . . . . . . . . . . . . . . . . . . 2

Blood transfusion before 1985. . . . . . . 1

Claims/Medical History. . . . . . . . . . . . . . 4

Occupation. . . . . . . . . . . . . . . . . . . . . . . . . . 1

Extensive period of no insurance. . . . 1

No current physical . . . . . . . . . . . . . . . . . -

27 21

5 8

3 4

2

7 5

2

2 1

1

45

17

9

11

2

2

aIncludes two companies that only require on APS for members of individually underwritten groups.

b

Includes three companies that only require physicals on members of individually underwritten groups.

SOURCE: Office of Technology Assessment, 1988.

26
AIDS and Health Insurance: A Survey February 1988

health history questionnaire and, second, to

determine whether known hypertensive applicants, for example, are conscientiously following prescribed treatment (table 18).

Insurance testing appears to be linked

with physical exams. Close to 90 percent of

commercial insurers requiring physicals

(41/47) sometimes request that the applicant

also be tested, and almost half of these insurers (22/47) uniformly test and examine

equivalent proportions of their applicants.

Only five companies reported performing

physicals and never testing.

As in the case of physical examinations,

routine testing is rare. In the aggregate,

responding insurers reported requiring blood

and/or urine screens from 4 percent of individual applicants, a total of approximately

83,000 individuals annually. Twenty-three

(38%) respondents reported that individual

applicants were never tested. Most companies

that do test, do so infrequently; 24 (39%)

respondents tested only 1 to 5 percent of

their applicants. Eleven (18%) reported testing at least 1 out of 10 applicants. One company tested every applicant (tables 15-16).

Blue Cross/Blue Shield Plans

Although BC/BS plans have faced increasing competition from HMOS and other

alternative insurers in recent years, the underwriting practices of many plans still

reflect their past tradition of community

rating and “taking all comers. ” Today, the

majority of plans (69%) do not hold open enrollment periods ( 12). Nevertheless, relative

to the commercial health insurers, the survey

findings indicate that less scrutiny is given a

BC/BS versus a commercial insurance applicant. Most BC/BS plans make no inquiries

beyond the health history portion of the application and an attending physician statement. It is the rare BC/BS plan that demands

a physical exam, blood chemistry, or

urinalysis.

Health History Questionnaire. All but one

(i.e., a continuous open enrollment program)

of the respondents requires non-group applicants to provide some health information

prior to enrollment. BC/BS enrollment health

history questionnaires vary in their comprehensiveness, but typically ask the applicant

(and each family member) to indicate any

history of receiving medical treatment or advice for a long list of diseases and disorders.

Attending Physician Statements. The APS,

along with the health history questionnaire, is

the information foundation of BC/BS nongroup underwriting. Twelve of the fifteen

responding plans (800A), including three that

offer open enrollment, order an APS for at

least 20 percent of their individual applicants.

Four of these plans require physician statements for 40 percent or more of their applicants. The only two respondents that

never ask for an APS are traditional, continuous, open enrollment programs with significant market shares (table 15).

The physician statements used by the

respondents are similar to those used by commercial health insurers; physicians are asked

to describe the applicant’s recent health history and provide laboratory findings. Two

BC/BS plans sometimes use diagnosis-specific

(e. g., cardiac, hypertension) physician

questionnaires that ask for extensiv e

clarification of the applicant’s health, including all relevant test findings.

A number of factors can lead a plan to

require a physician statement. All the

respondents said that the applicant’s selfreported medical history can “trigger” an APS

request. In addition, an APS is routinely ordered by 12 plans (86%) in cases of drug

abuse history; five plans (36°h), based on

claims history; and four plans (290/o), according to age (table 19).

Physical Exams. Only two plans reported requiring a physical exam. One holds continuous open enrollment and examines close

to one-third (30%) of non-group enrollees.

These physicals are done to evaluate whether

the applicant may opt out of the open enrollment program and enroll in a more comprehensive plan. The other plan does not accept

all applicants and examines, on average,

27
——

AIDS and Health Insurance: A Survey February 1988

H

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H

28
AIDS and Health Insurance: A Survey February 1988

Table 19. --Individual Underwriting by Blue Cross/Blue Shield Plans

Reasons for Requesting an Attending Physician Statement

Reasons Number of plans Percent of plans

(n=14)a

Diagnosis Reported on Application . . . . . . . . . . . . . . . . . . 14 100%

Drug Abuse History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 86

Age. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 29

Late Group Applicants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7

Sex. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 7

Sexual Orientation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

--

Geographic Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0

--

Inspection Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . o

--

Other, including:

Claims History. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 36

Height/Weight. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 14

aOne plan did not answer this question.

SOURCE: Office of Technology Assessment, 1988.

4 percent. Medical history, age, and weight

were reported as reasons for requiring a

physical (table 15).

Blood and Urine Screening. Blood and urine

testing is very rare among BC/BS plans.

Only one plan (7%) reported doing any testing of applicants; on average 4 percent of

non-group applicants are screened when a

physical exam is performed. (A second plan

reported intentions to test some applicants for

HIV infection. See below for details regarding HIV screening.)

Thus, as for the commercial insurers, the

APS appears to be the principal source of

testing information for the BC/BS plans.

Health Maintenance Organizations

The principal source of health information for the HMO underwriter is the health

history portion of the enrollment application.

The survey findings indicate that like BC/BS

applicants, the average HMO applicant receives less scrutiny than a commercial

insurance applicant. Most HMOS make no

inquiries beyond the health history portion of

the application and an attending physician

statement. It is the rare HMO plan that

demands a physical exam, blood chemistry, or

urinalysis.

Health History Questionnaire. All but 1 of

the 15 plans reported that the applicant must

complete a medical history questionnaire, and

for 5 HMOS (33%) it was the sole evidence of

the applicant’s health.

Attending Physician Statements. More than

half of the responding HMOS (8/15) went

beyond the enrollment application and requested an APS for 10 to 85 percent of their

non-group applicants. All the plans said that

the applicant’s self-reported medical history

could triggeran APS request. In addition, an

APS was ordered routinely by five plans

(33%) in cases of drug abuse history; two

plans, because of age, previous prescription

drug use or claims history; and one plan, for

late application to alargegroup (table 15).

29
. . .

AIDS and Health Insurance: A Survey February 1988

HMO physician statements do not differ

from those used by commercial insurers or

BC/BS plans; physicians are asked to describe

the applicant’s recent health history and provide laboratory findings.

Physical Exams. Only 3 of the 15 respondents accepting individuals reported requiring

a physical exam as a condition of enrollment

for 2 to 30 percent of self-pay applicants.

One of these plans required 30 percent of its

applicants to get a physical at their own expense. Medical history, APS findings, and

age were reported as reasons for requiring a

physical. In addition, one plan noted anunofficial policy requiring routine examinations

of applicants thought to be homosexual (e.g.,

single men 35 years or older).

Blood and Urine Screening. HMO screening

is as uncommon as physical exams; only three

plans reported sometimes testing individual

applicants. One plan required a complete

blood count and urine check for 20 percent

of its individual applicants. Another ordered

a complete blood count, cholesterol check,

and urinalysis for 85 percent of their self-pay

applicants. The third plan reported testing

very infrequently (i.e., less than 1 percent)

and always in conjunction with a physical

exam.

Thus, the APS also is the principal

source of testing data for HMOS.

AIDS Policies and Experience

Commercial Health Insurers

The survey asked several questions concerning AIDS underwriting policies and

claims experience:

Do Health Insurers Attempt To Identify Applicants Exposed To The AIDS Virus? Fiftyone (86%) responding commercial insurers either screen or plan to screen individual health

insurance applicants for infections with the

AIDS virus through some method; of these

companies, 41 do it currently and 10 plan to

do so (table 20).

How Do Insurers Screen For AIDS Exposure?

Not every company interested in identifying a

proposed insured’s HIV status, or risk for

AIDS, tests applicants. Many rely on the application’s health history questionnaire and

attending physician statements to evaluate the

risk for AIDS. Medical Information Bureau

reports also play an important role and may

serve as a catalyst for testing an applicant or

scrutinizing more carefully an applicant’s

health history (table 21).16

The most common approach to screening

potential insureds for AIDS is by incorporating a question in the health history portion of

the application. All but seven of the companies (86%) who screen individual applicants

use an AIDS question.

It is important to realize that including

an AIDS question on the application is less an

effective screen than it is an important tool

for contesting preexisting condition claims.

If an applicant knowingly misrepresents his

or her health condition (e .g. , HIV

seropositivity, recognized symptoms of AIDS,

or fully diagnosed AIDS or ARC), the insurer

may have grounds for subsequently denying

reimbursement for the condition. (See discussion below concerning insurers’ reported

experience with preexisting condition claims

for AIDS.)

AIDS-directed questions vary; some ask

about test results, others detail symptoms or

inquire whether the applicant has been diagnosed or treated for AIDS or an AIDS-related

condition. An admission of AIDS, ARC, or

16 On May 14, 1987, the MIB announced that, in

response to confidentiality concerns expressed by gay

rights advocates, it “will no longer keep records that show

an applicant for insurance haa tested positive for the AIDS

virus antibodies” (2). MIB reports now use a more general

code that indicates an “abnormal” blood count (without

identifying the test) and continue to report other high-risk

indicators including symptoms of AIDS, history of sexually

transmitted disease, drug abuse, etc.

30
AIDS and Health Insurance: A Survey February 1988

Table 20. --Commercial Insurers, BC/BS Plans, and HMOs Attempting to Identify

Individual Applicants Exposed to the AIDS Virus

Attempt to identify Commercial insurersaBC/BS plans HMOs

applicants exposed to (n=59) (n=15) (n=15)

the AIDS virus Number Percent Number Percent Number Percent

Yes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 69.5% 8 5 3 % 8 53%

86% 73%

No, but plans to. . . . . . . . . . . . . . . . . . 10 16.9 3 20 o --

No, and no plans tob. . . . . . . . . . . . . . 8 14 2 13 6 40

Other, including:

-AIDS policies under review. .., O -- 1 7 1 7

-Yes, but for less

than .5% of applicants. ..,,, O -- 1 7 0 --

aTwo insurers did not answer this question.

bThree HMOs are prohibited by State law from medical screening of any kind.

SOURCE: Office of Technology Assessment, 1988.

Table 21. --Commercial Insurers, BC/BS Plans, and HMOS

Methods Used to Screen Individual Applicants for Exposure to the AIDS Virus

Commercial insurersa BC/BS plansa

HMOsa

Method(s) used to (n=51) (n=ll) (n=8)

identify AIDS exposure Number Percent Number Percent Number Percent

Question on application . . . . . . . . . . . 44 86% 11 100% 8 100%

Attending physician statement . . . . . 42 82 9 82 6 75

ELISA and western blot. . . . . . . . . . . . 31 61 1 9 2 25

T-Cell subset study . . . . . . . . . . . . . . . 17 33 0 -- 0 0

Other, including:

physical exam if high risk. . . . O -- 0 -- 1 13

aData include only those insurers or plans that screen or intend to screen for AIDS exposure.

SOURCE: Office of Technology Assessment, 1988.

31
AIDS and Health Insurance: A Survey February 1988

HIV seropositivity results in immediate

refusal of the application. The survey did

not clarify whether applicants with

of sexually transmitted disease

symptoms are also automatically

These are some typical examples of

appearing in policy applications:

a history

or AIDS

rejected.

questions

Ever had Acquired Immune Deficiency Syndrome

(AIDS), “AIDS” Related Complex (ARC), or tested

positive for antibodies to the “AIDS” HTLV-111 Virus?

Social or venereal disease of any type?

Recurrent fever, fatigue, or night sweats?

Had a fever of more than three weeks’ duration, weight

loss of more than 15 pounds in two months, diarrhea of

more than one month’s duration, persistent skin rash

or oral lesions (infections or sores of the mouth)?

During the past ten years, has any person to be insured

consulted a physician or practitioner for, been treated

for, had, or been informed that he or she had, Acquired

Immune Deficiency Syndrome (AIDS), AIDS Related

Complex (ARC), or other immune deficiency?

Underwriters frequently order an APS to

help evaluate an applicant’s risk for AIDS; 82

percent or more of those screening individuals (42/5 1 ) for AIDS exposure require applicants’ physicians to submit an APS describing their recent health history and

laboratory and other diagnostic test results

(table 21). In addition to possibly revealing

AIDS symptoms or other risk factors, the APS

may also report the applicant’s HIV status. If

a photocopied medical record is submitted in

lieu of the standard APS (a common practice

among physicians), the applicant’s sexual

preference may be indicated as well.

HIV testing is also quite common. This

is particularly true for individual health insurance, where 61 percent of those insurers

that screen (and more than half of all respondents) require applicants to pass the ELISAELISA-Western blot series. One-third of

those that screen (17/51) also use the T-Cell

subset test, presumably in States where HIV

testing is prohibited. No company reported

using the ELISA test without Western blot

confirmation.

Substitution of the T-Cell test can be

problematic even for the healthy insurance

applicant. In California, where HIV testing is

prohibited and T-Cell testing is common, the

Department of Insurance has received complaints from HIV--negative individuals who

were unable to obtain insurance because of

positive T-cell test findings (5).

No insurer reported using any blood test

alternative other than the T-Cell subset study.

Who Is Required To Have An AIDS Test?

Thirty-one (51%) of the respondents routinely

tested individual health insurance applicants

for HIV antibodies; of these, seven test all

applicants, 14 test only those considered to be

“high-r isk,” and 10 test according to various

criteria (e.g., State of residence, medical history, policy amount, etc.). “High-risk” is

defined differently by each company; history

of sexually transmitted disease was the most

commonly reported criteria, although those

with a history of drug abuse, receiving blood

transfusions, and hemophiliacs are also frequently tested. Many companies, however,

reported that hemophiliacs and known drug

abusers are automatically denied coverage.

Three companies noted that for residents in

areas of high AIDS prevalence, particularly

New York and California, 100 percent of

their applicants are HIV-tested. Applicants

in California, where HIV antibody testing is

prohibited, undergo the T-Cell test (table 22).

How Many Individuals Have Insurers Reimbursed For AIDS-Related Claims? Almost

three-quarters of the companies (45/61)

responding to the survey had reimbursed at

least one individual policyholder for AIDSrelated care. In total, 1,010 AIDS cases were

reported and, on average, each insurer

financed the care of 22 AIDS-related cases.

The range of the AIDS “burden” on each insurer, however, varied widely. For individual

health insurance, for example, payments for

AIDS-related services ranged from no cases

(six companies) up to 269 (one company).

More than half of the companies (34/61)

reported 10 reimbursable AIDS cases or

fewer, while only four have reimbursed 60 or

more individuals for AIDS-related care (table

23).

32
AIDS and Health Insurance: A Survey February 1988

Table 22 .--Commercial Health Insurers

HIV Testing Practices and Criteria

for High Risk Applicants

Number of

companies

(n=61)

Surveyed Companies

Requiring HIV Test . . . . . . . . . . . . . . . . . . . . . . . . .

Who do they Test?a

All Applicants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

High Risk Applicants Only . . . . . . . . . . . . . . . . . . . . . . .

Other, including: . . . . . . . . . . . . . . . . . . . . . . . . . .

High incidence areas-all; elsewhere

based on medical history . . . . . . . . . . . . . . . . .

New York and Californiar all; elsewhere

based on medical history . . . . . . . . . . . . . . . . .

Anyone whose blood is drawn . . . . . . . . . . . .

Policy amounts over $100,000 . . . . . . . . . . .

If medical history warrants it . . . . . . . . .

Who is Considered High Risk?

All males . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

History of se ually transmitted disease . . . . % Hemophiliacs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

History of re eiving blood transfusions . . . . % Drug abusem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other, including:

All males, 20-50 . . . . . . . . . . . . . . . . . . . . . . .

AIDS symptoms present . . . . . . . . . . . . . . . . . .

History of hepatitis . . . . . . . . . . . . . . . . . . .

Individual consideration . . . . . . . . . . . . . . .

31 (51%)

7

14

7

2

1

1

1

2

1

15

7

8

10

1

4

1

1

a Three of the thirty-one insurers that HIV test did not

b answer this question.

Numerous carriers noted that they do not underwrite

hemophiliacs or drug abusers under any conditions.

SOURCE: Office of Technology Assessment, 1988.

dercounted. Moreover, it is not standard

practice among most insurers to project annual costs or claims by diagnosis.

Poor reporting of AIDS-related data may

be, in part, a reflection of the minimal impact of the disease in many locales around the

country. An official of one of the five

largest individual health insurers, despite

reporting 269 AIDS-related cases and historical costs of more than $3.2 million, commented to OTA that AIDS “is just a drop in

the bucket.”

Table 23--- Commercial Health Insurers

Range in Individually Underwritten AIDS-Related Cases

Number of Number of Percent of companies

AIDS-related companies reporting AIDScases (n=51)a related experience

None . . . . . . . . . . . . 6 12%

1-1o . . . . . . . . . . . . 28 55

11-49 . . . . . . . . . . 13 25

50-100 . . . . . . . . . . 2 4

More than 100 . . . 2 4

& Ten of the sixty-one respondents (16%) were unable to

provide AIDS-related case data.

SOURCE: Office of Technology Assessment, 1988.

It is important to note here that surveillance of AIDS-related cases and of costs to

insurers is sketchy at best. Sixteen percent

(10/61 ) of the individual health insurers

noted that case data were unknown or u n -

available, and the majority of those responding reported collecting AIDS-related case data

only since 1986. Cost projections for AIDS

cases were not provided by two-thirds of

those surveyed. Many commented to OTA

that identifying AIDS-related cases is often

difficult and, if data collection systems do

exist, cases and costs are probably un -

What Costs Do Insurers Project For AIDSRelated Claims For 1987? Twenty-one companies provided projections of AIDS-related

claims costs for 1987, forecasting total claims

of $11.04 million for individual health insurance, an average of $.53 million per insurer.

Projections ranged tremendously; two companies did not expect any AIDS cases this

year (both specialize in insurance for seniors),

while four projected costs of $1.3 to $2.3

million for individual health policies (table

24). (As noted above, one insurer reported

more than $3.2 million in AIDS-related

claims to date.)

33
AIDS and Health Insurance: A Survey February 1988

Table 24. - -Commercial Health Insurers

Range in 1987 Individually Underwritten AIDS-Related Cost Projections

Projecte d Number of Percent of companies

AIDS-related costs companie s projecting AIDS-related

(1987) (n=21) claims

o 2 10%

$io;ooo:io;ooo: ::::::::::: ::::::: 3 14

$100,000 -350,000. . . . . . . . . . . . . . . . . 6 29

$500,000-750,000. . . . . . . . . . . . . . . . . 6 29

$1.3 million-2.3 million . . . . . . . . . 4 19

a Forty insurers (almost two-thirds of the respondents) were unable to provide AIDS-related cost projections. Note, however, that one of these companies reported historical costs totaling $3.2 million for 269 case s

identified from January 1985 to June 1987.

SOURCE: Office of Technology Assessment, 1988.

What Proportion Of Insureds With AIDS

Have Been Found To Have A Preexisting

Condition For AIDS? Preexisting condition

clauses are used universally by health insurers

and significantly restrict reimbursement for

medical conditions that existed before the effective date of coverage. Two key time periods set limits on the insurer’s financial responsibility for such conditions: the length of

time before and the length of time after the

policy goes into effect. The NAIC has issued

several relevant model regulations. Regulations to implement their Individual Accident

and Sickness Insurance Minimum Standards

Act define a preexisting condition as “...the

existence of symptoms which would cause an

ordinarily prudent person to seek diagnosis,

care or treatment” or “a condition for which

medical advice or treatment was recommended by a physician or received from a

physician within a five year period preceding

the effective date of the coverage of the insured person” (emphasis added) (17).17 In addition, no claim for losses incurred two years

after the policy date should be denied on the

ground that the disease or physical condition

was preexisting (17).

17 As of October, 1987, the regulation had been adopted

by 20 States (16).

Though most experts agree that HIV

seropositivity does not meet the NAIC definition of a preexisting condition, the head underwriter of a top 10 company told OTA of

denying reimbursement on that basis. At

present, there are several court cases pending

relating to what comprises a preexisting condition for AIDS and the alleged refusal by

insurer(s) to pay for AIDS-related claims

based on a policy’s preexisting condition provision.

Almost half (21/44) of the individual

health insurers who had received at least one

AIDS-related claim reported finding no

preexisting AIDS-related cases. Eleven found

1 to 9 percent of cases to be preexisting; 10

companies discovered 10 to 50 percent. Two

companies reported more than 50 percent

(table 25).

What Plans Have Companies Made In

Response To The Financial Impact Of AIDS?

Beyond the actions already taken by many

insurers, and reported above, many companies

have additional plans in the works. The most

common are plans to reduce company exposure in the individual and small group

health insurance markets (e.g., by introducing

tighter underwriting guidelines) and to ex34
AIDS and Health Insurance: A Survey February 1988

Table 25. --Commercial Health Insurers and

BC/BS Plans Reporting AIDS Cases

Prevalence of Cases With a Preexisting Condition for AIDS

Commercial BC/BS

insurers

a

plan s

b

Proportion of AIDS cases with (n=44) (n=8)

a preexisting condition for AID S Number Percent

c Number Percent

O percent . . . . . . . . . . . . . . . . . . . . . . . . . . 21 47% 2 25%

1 to 9 percent . . . . . . . . . . . . . . . . . . . . . 11 25 3 38

10 to 50 percent . . . . . . . . . . . . . . . . . . . 10 23 1 13

greater than 50 percent . . . . . . . . . . . . 2 5 2 25

aOne of the forty-five commercial insurers that reported AIDS cases did

not answer this question. b

Two of the ten BC/BS plans that reported AIDS cases did not answer this

question. C

Percentages may not total 100 due to rounding.

SOURCE: Office of Technology Assessment, 1988.

pand HIV or other testing. One-third o f

those responding (20/61) plan one or both of

these measures. Nine companies intend t o

add an AIDS question to the health history

portion of their application forms. Fiv e

reported plans to exclude AIDS and/or

sexually transmitted diseases from individual

health coverage. Other planned measures include placing a dollar limit on AIDS coverage

in new policies and establishing a waiting period for AIDS benefits (table 26).

No insurer cited plans to withdraw from

the individual health market; however, one of

the largest surveyed insurers noted its withdrawal from the Washington, D.C. area. (The

District of Columbia has the nation’s most

stringent prohibitions regarding AIDS testing

and underwriting.) Nonetheless, it is difficult to assess whether AIDS has reduced the

availability of nongroup health coverage; insurers, for example, can effectively eliminate

their role in the market by pricing nongroup

policies so high that no one will buy them

(19).

Blue Cross/Blue Shield Plans

The survey asked several questions concerning AIDS underwriting policies and

claims experience:

Do Blue Cross/Blue Shield Plans Attempt To

Identify Applicants Exposed To The AIDS

Virus? Eleven or 73 percent of the respondents either screen or plan to screen direct

pay applicants for AIDS exposure by one

method or another; of these, eight currently

screen direct pay applicants and three plan to.

One additional plan noted that its AIDS

policies are under review (table 20).

How Do Blue Cross/Blue Shield Plans Screen

For AIDS Exposure? The plans’ approach to

screening for AIDS very much mirrors their

general approach to underwriting. The health

history questionnaire along with an attending

physician statement are the principal means

for assessing an applicant’s health. Testing is

very rare (table 21).

35
.

AIDS and Health Insurance: A Survey February 1988

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36
AIDS and Health Insurance: A Survey February 1988

The 11 plans that try to identify applicants exposed to the AIDS virus, use an

AIDS-related question in applications for

direct pay coverage. The BC/BS approach to

asking about AIDS differs from many commercial carriers. Rather than ask about

AIDS-related symptoms or test results, the

plans have simply added AIDS and/or AIDS

Related Complex to their health history diagnoses lists. Venereal disease is also included

by five plans. One plan asks a more general

question concerning “positive test results for

immune disorders” because it is prohibited,

by State regulations, from asking directly

about AIDS. Interestingly, a continuous,

open enrollment plan that does not screen for

AIDS exposure specifically instructs the applicant not to indicate need for medical advice or treatment “because you have had a

positive result on an AIDS test--HTLV-III.”

An admission of AIDS, ARC, or HIV

seropositivity results in immediate refusal of

the application except in open enrollment

plans. As in the case of commercial insurers,

BC/BS plans include an AIDS question on the

application not only for screening purposes

but also as an important tool for contesting

preexisting condition claims. If an applicant

knowingly misrepresents his or her health

condition, the plan has grounds for denying

reimbursement for the condition. (See discussion below concerning BC/BS reported experience with preexisting condition claims for

AIDS.)

Nine plans (82%o) may ask for an APS to

help evaluate a direct pay applicant’s risk for

AIDS. The APS may indicate AIDS symptoms, other risk factors, HIV status, and even

sexual preference.

Only one plan intends to test some applicants for HIV infection (using the ELISAELISA-Western blot series). No pla n

reported using the T-cell subset test.

Who Is Required To Have An AIDS Test?

As noted above, only one plan expects to test

some applicants for HIV infection. Anyone

considered to be “high-risk” will be required

to undergo the ELISA-ELISA-Western blot

series. The plan’s criteria for “high-risk” include: 1) all males, 2) history of sexually

transmitted disease, 3) hemophiliacs, 4) history of receiving blood transfusions, and 5)

drug abusers.

How Many Blue Cross/Blue Shield Subscribers Have Been Reimbursed For AIDSRelated Claims? BC/BS surveillance of

AIDS-related cases and costs seems sketchy at

best. One-third of the plans noted that case

data were unknown or unavailable, and the

majority reported collecting AIDS-related

data only since summer 1985. Several plans

indicated that they are just now developing

systems for better identifying subscribers

diagnosed with AIDS-related illnesses; furthermore, current caseload data are probably

underestimated. Ten of the fifteen respondents were not able to provide projections of

AIDS-related claims costs for 1987 (table 27).

Most of the plans that provided relevant data

were unable to identify AIDS-related cases or

costs by type of coverage (i.e., individual vs.

group). Consequently, aggregate data is presented here reflecting both individual a n d

group policy experience.

Ten plans reported reimbursing 3,933

subscribers for AJDS-related care, an average

of 393 subscribers per plan. The range in

caseload was tremendous, from only 1 to

3,000 subscribers. Along with the obvious

effect of location on regionally based insurers

such as BC/BS plans, market share and open

enrollment seem to critically determine a

plan’s AIDS ”burden.”

Open enrollment plans with a large share

of the health insurance market appear to be

particularly vulnerable if also located in a

State that is seriously burdened by the

epidemic. The seven plans that never holdan

open enrollment period reported a total of

453 AIDS-related cases, an average of 65

subscribers per plan. Three of these plans

are located in areas of high AIDS prevalence,

and only one has historically held a significant market share (i.e., close to 40%) (4).

In stark contrast, the three plans that are

continuously open reported reimbursing 3,480

subscribers for AIDS-related care, an average

37
AIDS and Health Insurance: A Survey February 1988

of 1,160 cases per plan. Two of these plans

are in areas of high AIDS prevalence, one

plan alone accounts for 3,000 cases. All three

have historically held large market shares

ranging from 60 to 75 percent (table 27).

What Costs Do The BC/BS Plans Project For

AIDS-Related Claims For 1987? Only five

plans provided 1987 claims projections.

Three non-open enrollment plans forecast a

total of $29.6 million in AIDS-related claims

for 1987 ($20 million was for one plan alone).

Two of these plans are located in high-risk

regions. Claims totalling $27 million were

projected by two open enrollment plans, $23

million for one plan and $4 million for the

other (table 28).

What Proportion Of Subscribers With AIDS

Were Found To Have A Preexisting Condition

For AIDS? Eight of the 10 plans that have

identified at least one subscriber with AIDS

reported finding that 1 to more than 50 percent of these subscribers had a preexisting

condition for AIDS. Two of these plans,

both in areas of high AIDS prevalence, linked

more than half of their AIDS cases with a

preexisting condition (table 25). This may be

evidence of adverse selection and the effort

of AIDS sufferers to obtain insurance protection after an AIDS-related diagnosis had

been made or seriously suspected.

Table 27. --Blue Cross/Blue Shield Plans

Number of Subscribers Reimbursed for AIDS-Related Claims

No open Open All

enrollment enrollment plans

(n=10 ) (n=5 )a (n=15 )

Total number of subscribers

reimbursed for AIDS-related

claimsb. . . . . . . . . . . . . . . . . . . . . . . 453 3,480 3,933’

Number of plans reporting

AIDS-related claims. . . . . . . . . . . 7 (70%) 3 (60%) 10 (67%)

Average number of AIDSrelated cases per plan. . . . . . . . 65 1,16 0 393

aone of the five plans holds a limited open enrollment period; the others

are continuous.

bAIDS-related claims data reflect both individual and group policy experience.

cone planalone reported 3,000 subscribers with AIDS; the other plans had an

average AIDS-related caseload of 104.

SOURCE: Office of Technology Assessment, 1988.

38
AIDS and Health Insurance: A Survey February 1988

Table 28. --Blue Cross/Blue Shield Plans

Projected AIDS-Related Claims Cost for 1987

No open Open All

enrollment enrollment plans

(n=lO) (n=5)b (n=15)

Total projected AIDS-related

claims cost for 1987=

$29.6 million $27.0 million $56.6 million

Number of companies

reporting projections 3 (30%) 2 (40%) 5 (33%)

Average projected

cost for 1987 $9.9 million $13.5 million $11.3 million

Range $2.6 to $20 $4 to $23 $2.6 to $23

million million million

a

AIDS-related cost projections include individual and group policies.

b

One of the five plans holds a limited open enrollment period; the others

are continuous.

SOURCE: Office of Technology Assessment, 1988.

What Plans Have BC/BS Plans Made In

Response To The Financial Impact Of AIDS?

All but two of the respondents report some

action in response to the AIDS epidemic. Six

plans (40940) noted intentions to redube their

exposure in the individual and small group

health markets. One cited intentions to expand HIV or other testing of applicants while

also excluding AIDS and/or sexually transmitted diseases from individual health

coverage. Others reported intentions to add

an AIDS question to enrollment applications,

deny applicants with a history of sexually

transmitted disease, and lengthen the waiting

period for new subscribers with a history of

hepatitis, lymph disease, and mononucleosis.

Two plans (one holds continuous open enrollment) intended to expand their AIDS education efforts, and two others are currently

reviewing their AIDS-related policies (table

26).

Health Maintenance Organizations

The survey asked several questions concerning AIDS underwriting policies and

claims experience:

Does The HMO Attempt To Identify Applicants Exposed To The AIDS Virus? Mor e

than half of the respondents (8/15) screen individual applicants for exposure to the AIDS

virus by one method or another. Three of

the plans that do not try to identify applicants exposed to AIDS are prohibited from

doing any medical screening by State law.

39
AIDS and Health Insurance: A Survey February 1988

One plan noted that it is currently formulating its AIDS policies (table 20).

How Does The HMO Screen For AIDS Exposure? The responding HMOS rely primarily on the enrollment application and the attending physician statement to identify applicants exposed to the AIDS virus. HIV

testing is done by only two plans and is being

considered by a third (table 21).

Each of the eight plans that screen for

HIV infection ask an AIDS-directed question

in the health history portion of their enrollment form. Some of the respondents have

simply added AIDS and/or ARC to the application’s health history list of diagnoses,

while one plan asks: “Had any blood tests including any screening for the presence of

viral antibodies?”

An admission of AIDS, ARC, or HIV

seropositivity results in immediate declination

of the application. Like the commercial insurers and BC/BS plans, the HMOS include

an AIDS question on the application not only

for screening purposes but also as an important tool for contesting preexisting conditions.

If an applicant knowingly misrepresdnts his

or her health condition, the plan may have

grounds for terminating HMO membership.

Six plans (75%) report that they request

an APS to help determine an individual applicant’s risk for AIDS. As noted earlier, the

APS may report AIDS symptoms, other risk

factors, HIV status, and even sexual preference.

Only two plans (25%) require self-pay

applicants to be tested. Both use the ELISAELISA-Western blot series. Another plan

reported that it is considering plans to introduce HIV testing of applicants. No plan

reported using the T-cell subset test (table

21). One plan that is located in a State where

HIV testing is prohibited requests a physical

exam of all high-risk applicants.

Who Is Required to Have An AIDS Test? As

noted above, only two HMOS reported that

they test some applicants for HIV infection.

At both plans, anyone considered to be “highrisk” will be required to undergo EL ISAELISA-Western blot testing. At one plan

“high-risk” is defined as a history of sexually

transmitted disease or drug abuse. (This plan

requires applicants to be tested at their own

expense. ) The other plan considers 12

conditions -- for example, acute onset of

severe seborrheic dermatitis, history of three

or more episodes of any sexually transmitted

disease, or Kaposi’s sarcoma--to be high-risk

indicators.

How Many Members With AIDS/ARC Have

The HMOS Had? The responding HMOS’

AIDS/ARC case data seem to be just as

sketchy as the statistics provided by the commercial and BC/BS plans. One HMO

identified AIDS cases as early as 1981, some

plans reported patients in 1983, while others

cited cases as of only this year. As for the

BC/BS plans, the HMOS were unable to

identify AIDS-related cases or costs by type

of coverage (i.e., individual vs. group). Consequently, aggregate data is presented here

reflecting both individual and group membership experience. In total, twelve plans

reported caring for 1,468 members with AIDS

or ARC, an average of 122 members per

HMO. The range in cases varied from none

at two HMOS to 940 patients at one HMO

(table 29).

What Costs Do The HMOS Project For

AIDS-Related Care In 1987? Only two

HMOS provided projections of AIDS-related

costs for 1987. One plan that had identified

10 cases during the first 10 months of 1987

forecast total costs of $750,000 for the year;

the other had 11 cases from September 1986

through September 1987 and forecast total

costs of $700,000 for 1987. At both plans, no

cases occurred among nongroup members.

(An additional HMO that had reported caring

for 940 AIDS-related cases since 1981 did not

project 1987 costs, but estimated average

lifetime costs of approximately $35,000.)18

18 Average lifetime cost is the total cost from

time of diagnosis until death.

40
—. — —

AIDS and Health Insurance: A Survey February 1988

Table 29.--Health Maintenance

Organizations

Range in AIDS/ARC Caseload

Number of Number Percent

AIDS/ARC cases a

of HMOS of HMOS

(n=16)

of the 16 HMOS (3 IYo) reported intentions to

reduce their exposure in the individual and

small group health markets (e.g., by introducing more restrictive underwriting guidelines)

while two plans intend to expand HIV or

other testing, two others are currently considering their AIDS-related policies, and one is

withdrawing from the individual health

market altogether (table 26).

None . . . . . . . . . . . . . . . . . . . . . 2 13%

1-25 . . . . . . . . . . . . . . . . . . . . . . 7 44

60-70 . . . . . . . . . . . . . . . . . . . . . 2 13

110-200 . . . . . . . . . . . . . . . . . . . 2 13

900-1000 . . . . . . . . . . . . . . . . . . 1 6

Not Available . . . . . . . . . . . . . 2 13

Top Ten Most Costly Conditions:

AIDS vs. Other Major Illnesses

Commercial Health Insurers

aAIDS/ARC cases include individual and group

members.

SOURCE: Office of Technology Assessment, 1988.

What Proportion of HMO Members With

AIDS Or ARC Were Found To Have A

Preexisting Condition For AIDS? A non -

federally qualified HMO, located in a high

prevalence area, reported that more than half

of its individual members with AIDS or ARC

were found to have a preexisting condition.

According to State law and in contrast to the

other insurers, this plan was obligated to provide services for preexisting conditions

(without a waiting period) unless the applicant had deliberately misrepresented his or

her health before joining the HMO (13).

(Federally qualified HMOS may have grounds

to disenroll members who misrepresent their

health, but the HMO is obligated to provide

medically necessary health services until

membership is terminated.)

What P1ans Have The HMOS Made In

Response To The Financial Impact Of The

AIDS Epidemic? Almost half of the respondents (8/ 16) reported no new plans in

response to the AIDS epidemic. However, 5

Individual and small group (i.e., individually underwritten) coverage is perhaps the

health insurance sector most vulnerable to

financial loss in the wake of an unanticipated

AIDS epidemic. In an effort to put the costs

of AIDS into context and evaluate its impact,

OTA asked insurers to identify which 10 of

22 major diagnostic categories (including

AIDS and related conditions) absorbed the

greatest share of claims dollars for individually underwritten policies. Thirty-six (58%0)

of the 62 respondents were able to provide

these data.

Six of 36 companies (17°/0) reported that

AIDS was among the 10 diagnoses that accounted for the largest proportion of individually underwritten claims. Overall, AIDS

and related conditions ranked sixteenth for

commercial insurers. The complete list of

diagnoses in order of the frequency with

which they were ranked as top 10 are presented in table 30.

Blue Cross/Blue Shield Plans

BC/BS plans were also asked which 10 of

22 major diagnostic categories (including

AIDS and related conditions) absorbed the

greatest share of claims dollars for individually underwritten policies. Eight of the fifteen respondents (53%) were able to provide

these data.

41
AIDS and Health Insurance: A Survey February 1988

Table 30.--Commercial Health Insurers

AIDS vs. Other Major Illnesses

The surveyed insurers were provided a list of 22 major diagnostic categories, including AIDS and related conditions, and asked to rank the ten diagnoses that account for the largest proportion of their total individually

underwritten claims costs (see Appendix A, question III-D.).

Number of times diagnosis

Diagnostic category was ranked in the top ten

(n=36) a

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

■ 1 6 .

J7.

18.

19.

20.

21.

22.

Circulatory disorders, including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

b

Heart disease, essential hypertension, cerebrovascular

disease, other circulatory disorders

Neoplasms, including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Malignant neoplasm of trachea, bronchus and lung;

malignant neoplasm of breast; other neoplasms

Respiratory disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Digestive disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diseases of the female reproductive system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Injury, poisoning and toxic effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Musculoskeletal/connective tissue diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Kidney/urinary tract diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mental disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nervous system diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liver, gallbladder, pancreatic disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pregnancy, childbirth, and the puerperium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diabetes mellitus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Congenital abnormalities/perinatal conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Substance use/induced organic disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

AIDS AND RELATED CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ear, nose, and throat diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Eye diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diseases of the skin, subcutaneous tissue and breast . . . . . . . . . . ..

Male reproductive system diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Infectious and parasitic diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Other endocrine and metabolic diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

51

27

25

25

24

21

15

15

14

14

12

10

9

8

6 -

4

4

4

4

1

1

aOnly 360 of the 62 responding insurers (68%) were able to answer to this question.

b

Some of the responding insurers ranked specific diseases (e.g. heart disease, malignant neoplasm of the breast) within the

general categories of "circulatory disorders” and "neoplasms”; others were unable to report their claims experience at this

level of detail. As a result, circulatory disorders and neoplasms appear in the top ten more than 36 times.

SOURCE: Office of Technology Assessment, 1988.

42
AIDS and Health Insurance: A Survey February 1988

Only two of eight plans (250/o) reported plans. The complete list of diagnoses in

that AIDS was among the 10 diagnoses that order of the frequency with which they were

accounted for the largest proportion of indi- ranked as top ten are presented in table 31.

vidually underwritten claims. Both are located in areas of high AIDS prevalence; one Health Maintenance Organizations

plan reported that AIDS and related conditions absorbed 9 percent of claims dollars, the The responding HMOS did not provide

other, 4 percent. Overall, AIDS and related sufficient information to analyze their

conditions ranked fourteenth for BC/BS response.

Table 31--- Blue Cross/Blue Shield Plans

AIDS vs. Other Major Illnesses

The surveyed plans were provided a list of 22 major diagnostic categories, including AIDS and related conditions,

and asked to rank the ten diagnoses that account for the largest proportion of their total individually underwritten

claims costs (see Appendix A, question III-D.).

Number of times diagnosis

Diagnostic category was ranked in the top ten

(n=8) a

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

 14 .

15.

16.

17.

18.

Circulatory disorders, including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Heart disease, essential hypertension, cerebrovascular

disease, other circulatory disorders

Respiratory disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Digestive system disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Musculoskeletal/connective tissue diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Neoplasms, including: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Malignant neoplasm of trachea, bronchus and lung;

malignant neoplasm of breast; other neoplasms

Pregnancy, childbirth, and the puerperium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mental disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Injury, poisoning, and toxic effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Congenital abnormalities/perinatal conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liver, gallbladder, pancreatic disorders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Kidney/urinary tract diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Nervous system diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diseases of the female reproductive system . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

AIDS AND RELATED CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Infectious and parasitic diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Blood diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ear, nose, and throat diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Eye diseases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

8

8

8

6

6

6

5

5

4

3

3

3

2 D

1

1

1

1

aOnly 8ofthe 15 responding plans (53%) were ableto answer to this question.

b

Some of the responding plans ranked specific diseases (e.g., heart disease) within the general category of ’’circulatory

disorders”; others were unable to report their claims experience at this level of detail. As a result, circulatory disorders

appears in tll~ top ten more than eight times.

SOURCE: Office of Technology Assessment, 1988.

43
Appendix A

SURVEY QUESTIONNAIRE

NOTE:

The following pages reproduce the survey questionnaire sent to the

commercial health insurers. The questionnaire was modified slightly for

the Blue Cross/Blue Shield plans and Health Maintenance Organizations

to include proper terminology and reflect differences in rating and enrollment practices.

45
AIDS and Health Insurance: A Survey February 1988

CONGRESSIONAL OFFICE OF TECHNOLOGY ASSESSMENT

DIAGNOSTIC AND PREDICTIVE MEDICAL TESTS PROJECT

SURVEY OF HEALTH INSURANCE COMPANIES

I. GENERAL INFORMATION

Company:

Address;

Contact Person:

Title:

Telephone:

PLEASE NOTE: This suney focuses on three health insurance populations -- (1) Individuals who seek

insurance independently and without any association with an employer or membership group

of any kind. (2) Individually underwritten groups, those groups which are too small i.e.,

to qualify for experience rating and whose members must be individually underwritten.

(3) All other groups, i.e. employee and other groups which do not require individual ,

underwriting (except in the case of late entrants) .

Please refer only to these three populations when responding to the questionnaire.

Conversions should be excluded from your responses.In addition, we prefer that

you exclude Medigap insurance from your responses. If, because of reporting or

other reasons, you must include Medigap policies, please check the box below:

[1 YES, Medigap policies and statistics are included in our responses to this survey.

QUESTIONS: Please call Jill Eden at the Office of Technology Assessment (telephone: 202-228-6590).

Page 1

46
AIDS and Health Insurance: A Survey February 1988

II. UNDERWRITING PRACTICES

A. For each category of coverage, please esthate the proportio n

of health insurance applicants for whom:

Individuall y A l l

Individual Underwritten GrOUD S Other Groups

1. An attending physician statement (APS)

is required. % % %

** If an ApS is required, which of the following

factors trigger an APS request? (check all that apply)

[ ] diagnosis or symptoms reported on

application or examination

[ ] age

[ ] sex

[ ] M.I.B., Inc.

[ ] inspection report

[ ] sexual orientation

[ ] drug abuse history

[ ] late group applicant

[ ] geographic area

[ ] other, please specify:

2. A physical exam is conducted. z

** If a physical exam is conducted, which of the

following factors trigger a request for a physical?

(check all that apply)

[ ] diagnosis or symptoms reported on application

[ ] APS findings

[ ] age

[ ] sex

[ ] MIB, Inc.

[ ] inspection report

[ ] sexual orientation

[ ] drug abuse history

[ ] late group applicant

[ ] geographic area

[ ] other, please specify:

%

Page 2

47
AIDS and Health Insurance: A Survey February 1988

3. Blood or urine screens are performed.

** If screening is performed, please indicate

the names of the tests included in the screen:

(Or attach a list)

Individual

Blood Urine

%

4. A financial or personal investigation is

conducted (e.g. ,motor vehicle or credit checks) . %

Individually A l l

Underwritten GrOUDS Other GrouDs

% %

% %

Page 3

48
AIDS and Health Insurance: A Survey February 1988

B. For individually underwritten applicants, please indicate the importance of each of

the following factors in determining insurability: (Note the response definitions below.

For each factor, place a check in only one of the columns. )

Verv Important Important Unimportant Never Used

1. age

2. type of occupation

3. avocation (e.g., skiing or

skydiving)

4. financial status (i.e., income or

credit worthiness)

5. health endangering personal habits

(e.g., alcohol or drug abuse)

6. health enhancing personal behavior

(e.g., premium credits for non-smokers)

7. illegal or unethical behavior (e.g. ,

criminal or questionable business

practices)

8. place of residence

9. sexual orientation

10. other, specify:

PLEASE NOTE THESE DEFINITIONS:

Verv ImDortanC - Critical to underwriting process;can affect acceptance/rejection.

Important - Always considered but will never by itself affect acceptance/rejection. It may, however,

influence coverage limits (e.g. ,exclusions or waiting period) and/or premium.

Unimportant - Rarely affects acceptance/rejection, coverage limits, or premiw -- unless in conjunction

with other more important factors.

Never Used - Never considered.

Page 4

49
AIDS and Health Insurance: A Survey February 1988

c. Please answer the following questions regarding

your company’s AIDS policies:

Individual

1. Do you attempt to identify applicants who have been

exposed to the AIDS virus?(check one for each category)

- yes [1

- no, but plan to [ 1

- no, and no plans to [ 1

other, specify: [1

*W If yes (or “no, but plan to”), please indicate the following:

(All others go to question #2, next page)

a. ScreeninE method (check all that avplv) :

- question(s) on application

attending physician statement

- ELISA only

- ELISA and Western blot

(if positive ELISA)

- T-cell subset study

other blood tests, specify:

[ 1

[1

[1

[1

[1

[1

Individuall y All

Underwritten CrouD Other Groum

[ 1

[ 1

[ 1

[ 1

[ 1

[ 1

[ 1

[ 1

[ 1

[ 1

[ 1

[1

[ 1

[ 1

[ 1

[ 1

[ 1

[1

[1

[1

Page 5

50
AIDS and Health Insurance: A Survey February 1988

b.

c.

2. How

Individuall y Al 1

Individual Underwritten Groups Other Grou~s

[1

[1

[1

[1

[ 1

[ 1

Which avDlicants are (or will be) reauired

to have an AIDS blood test?

All applicants

Applicants at high risk for AIDS

If only applicants at hi~h risk for AIDS are

tested. who is selected? (check all that applv)

all males [ 1 [1 [ 1

applicants with history of sexually transmitted [1 [ 1 [ 1

disease

hemophiliacs [1 [1 [ 1

applicants with history of receiving [1 [ 1 [ 1

blood transfusions

drug abusers [ 1 [1 [ 1

other, specify: [1 [ 1 [ 1

many of your insureds have you reimbursed

for AIDS-related claims? -

- please specify related time period:

3. If available, please indicate your company’s projected

AIDS-related claims costs for 1987. $ $ s

4. If your company has had AIDS-reiated claims, what percent of the individuals with AIDS

have been found to have a preexisting condition for AIDS? (check one for each category)

- 0 percent [ 1 [1

- 1 to 9percent [ 1 [1

- 10 to 50 percent [ 1 [ 1

- greater chan 50 percent [1 [1

Page 6

51
AIDS and Health Insurance: A Survey February 1988

5. Does your company plan to do any of the following, in response to

the financial impact of AIDS (please check all that apply):

- Withdraw from the individual health market altogether [1

- Exclude AIDS and/or sexually transmitted diseases

from individual health coverage [ 1

- Reduce company exposure in the individual [ 1

and small group health markets (e.g. , by

introducing more restrictive underwriting guidelines).

- Expand HIV or other testing of applicants

- Other, specify:

[1

[1

111. INDIVIDUAL AND SUALL GROUP STATISTICS

Individual Individually

Policies Underwritten Grouvs

A. Average number of applications per year

B. Please indicate proportion of individuals

that are : (numbers should total 100%)

- accepted at standard rates % %

- covered with an exclusion waiver ~ % %

- covered with a rated premium only % %

covered with an exclusion waiver

~ rated premium % %

- declined % %

m 100 z 100 %

c. If members of individually underwritten groups are not rated, ridered, or declined

on an individual basis,what proportion of the groups, as a whole, are:

accepted with a rated premium %

- decline d %

Page 7
AIDS and Health Insurance: A Survey February 1988

OY

4J

——

—.

-—-—

.--—

m

m

w

n

o

v

m

o “

L1

o

$.

0

c

00

e-l

m

u) m .,

om

Lo

o

Q

m

&l

Mu alal &5 *

20

AJ

.4

-

c

0

v

.?4

u

o

1

I

,

I

w

al

!%E

‘a

$!m

4

n

,m

1+ w r-l d“m”

53
AIDS and Hea[th Insurance: A Survey February 1988

I

z

Ld

-e ———— —- —

m

~Q0 ——-———-

e

———-

-.. .

— —

m

,.

c-l

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Is A m

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./4

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w

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m 2 W n.

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, 0 ,

0 . (?Y a

w

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(n

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0

,

w-l

.d n n u

(3

JJ

c

8

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co m l-(

.+ f=

54
AIDS and Health Insurance: A Survey February 1988

m

A

o

a) Ml

2

.

w

m

N

LI

u

o

6

ul

4

n

!-l

(=4

55
—

AIDS and Health Insurance: A Survey February 1988

IV. NATERIAL REOUESTS

Please attach a sample of the following (for individually underwritten applicants only):

1.

2 .

3 .

4 .

5 .

6 .

7 .

individual applicatio n

individual policies or brochures

actending physician statement (if used)

lab report form (if used)

list of

(I f a

list of

(If a

list of

(If a

V CO14NENT~

uninsurable medical conditions, i.e., diagnoses for which coverage will not be offered

complete list is unavailable, pase list the fifteen most common uninsurable conditions).

medical conditions requiring a temporary or permanent exclusion waiver (if used)

complete list is unavailable, pase list the fifteen most common conditions).

medical conditions requiring a rated premium (if used)

complete list is unavailable, please list the fifteen most common conditions).

Please return survev in the enclosed. stamped enveloDe to: Jill Eden, Office of Technology Assessment,

Health Program, United States Congress, Washington, D.C. 20510-8025.

Page 11

56
AIDS and Health Insurance: A Survey February 1988

Appendix B

LIST OF ABBREVIATIONS and GLOSSARY OF TERMS

List of Abbreviations

ACLI

AIDS

APS

ARC

BC/BS

CFR

COBRA

ELISA

GHAA

HIAA

HIV

HMO

MIB

NAIC

OTA

--American Council on Life Insurance

--acquired immunodeficienc y

syndrome

--attending physician statement

--AIDS-related complex

--Blue Cross and Blue Shield Associations

--Code of Federal Regulations

--Consolidated Omnibus Budget

Reconciliation Act of 1985

--enzyme-linked immunosorbent

assay

--Group Health Association of

America

--Health Insurance Association of

America

--human immunodeficiency virus

--health maintenance organization

--Medical Information Bureau

--National Association of Insurance

Commissioners

--Office of Technology Assessment

(U.S. Congress)

Glossary of Terms

Adverse selection: The tendency of persons

with poorer than average health expectations

to apply for, or continue, insurance to a

greater extent than do persons with average

or better health expectations. Also known

as antiselection.

Community-rating: A method of determining

premium rates that is based on the allocation of total costs without regard to past

claims experience. Community-rating is required of federally qualified HMOS.

Conversion privilege: The right to change insurance without providing evidence of insurability, usually to an individual policy

upon termination of coverage under a group

con t r ac t. Conversion privileges ar e

mandated by the Consolidated Omnibus

Budget Reconciliation Act of 198 5

(COBRA) (Public Law 99-272).

Direct pay coverage: See individual health

insurance.

Exclusion waiver: An agreement attached to

an insurance policy which eliminates a

specified preexisting condition from

coverage under the policy.

Expe~ience-rating: A method of determining

group premium rates based on the actual

amount of claims payments made on behalf

of the group in a prior period, usually the

preceding year.

Federally qualified: An HMO that is

certified as meeting the qualification requirements of the Federal Healt h

Maintenance Act of 1973, as amended (42

U.S, C. Sec. 300e et seq.). Federally

qualified HMOS must adhere to certain

financial, underwriting, and rate-setting

standards and provide specified, medically

necessary health services.

57
AIDS and Health Insurance: A Survey February 1988

Individual health insurance: Health insurance that covers an individual and members

of his or her family without any association

with an employer or membership group of

any kind.

Individually underwritten groups: Small employee groups that usually include no more

than 50 individuals. Small group underwriting requires that individual group

members provide a statement of health and

evidence of insurability.

Open enrollment: A health insurance enrollment period during which coverage is offered regardless of health status and without

medical screening. Open enrollment periods

are characteristic of some BC/BS plans and

HMOS.

Preexisting condition: A condition existing

before an insurance policy goes into effect

and commonly defined as one which would

cause an ordinarily prudent person to seek

diagnosis, care or treatment.

Rated premium: A premium with an added

surcharge that is required by insurers to

cover the additional risk associated with

certain medical conditions. Rated premiums

usually range from 25 to 100 percent of the

standard premium.

Risk classification: The evaluation of

whether an insurance applicant will be covered on a standard or substandard basis, or

not at all.

Self -payers: See individual health insurance.

Standard risk: A person who, according to

an insurer’s underwriting criteria, is

entitled to purchase insurance coverage

without extra premium or special restriction.

Substandard risk: A person that does not

meet the normal health requirements of a

standard health insurance policy and whose

coverage is provided with a higher premium

and/or exclusion waiver.

58
AIDS and Health Insurance: A Survey February 1988

REFERENCES

1.

2.

3.

4.

5.

6.

7.

8.

Best’s Executive Data Service, “Best’s

Life-Health Industry Marketing Results,”

Old Wick, NJ, 1986.

Day, N., President, Medical Information

Bureau, Boston, MA, personal communication, Aug. 31, 1987.

Di Carlo, S., Statistical Studies Coordinator, Health Insurance Association of

America, Washington, DC, personal communication, Dec. 23, 1987.

Fanara, P., and Greenberg, W., “The Impact of Competition and Regulation on

Blue Cross Enrollment of Non-Group Individuals,” The Journal of Risk and Insurance, PP.7,188- 189, Spring 1985.

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60