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Health insurance for overweight applicants

by Tony Novak, CPA, MBA, MT     revised 2/23/2016

About 36% of U.S. adults are obese, according to the Centers for Disease Control and Prevention. The obesity projection over the next 15 years expanded recently from 42%¹ to more than 50% of the U.S. by 2030. The portion of those considered severely obese will grow at the greatest pace. Obesity rates for women are relatively stable so the anticipated increase is primarily attributable to fatter men. Those considered severely obese or clinically obese are those who are more than 80 pounds overweight. Obesity is associated with a number of medical conditions that indicate significantly higher medical needs and a shorter life expectancy. In short, overeating is our greatest health risk.

Before the Affordable Care Act, obesity made it nearly impossible to qualify for the best health insurance rates. The financial risks to an insurer of an applicant who is severely obese means that even an extra amount of premium cannot offset the expected medical costs. For years health insurance companies have charged extra premiums to overweight members. Most obese individuals were eligible for coverage through a special legally mandated insurance plan rather than a commercial health insurance plans. The rates under a mandated plan were set lower than the individual's expected medical costs and those costs were subsidized by government subsidies or premium payments of other healthier members of the health plan. 

Today obese applicants can enroll in health insurance at the same terms and prices as everyone else. But that does not mean that the additional coverage cost is buried. Small business employers, in paticular, will contine to directly pay for the directly increased insurance cost of obese employees.

Life insurance and disability income insurance are equally difficult and expensive for an obese individual. Other studies link obesity with lower lifetime earnings and greater time out of work. Financial and estate planning is significantly more difficult for an obese individual facing this combination of challenges.

The nation is slowly changing its attitude toward obesity as a medical condition. The IRS now allows the cost of weight loss programs to be deducted by taxpayers as a normal medical expense. Employee benefit plans may now classify weight control costs as a tax-free benefit under a health plan. A growing number of state health plans now cover gastric by-pass surgery as an "ordinary and necessary medical expense". 

 In those cases where severe obesity is accompanied by full or partial disability, unemployment or underemployment, the high cost of these health insurance plans is often unaffordable. We know that obesity is associated with lower earnings.  

In small business health insurance plans the extra cost of caring for overweight members is spread evenly among all of the employees of the business. Adding an obese employee can boost the premium cost by 5% to 40% for everyone in the group and may cause resentment among the lighter weight employees.

There are still a few low cost non-qualified health insurance plans available without regard to the applicant' s weight (with the exceptions noted below). In most states immediate issue short term medical insurance including Simple STM, Secure STM policies (all available at Freedom Benefits) can be issued at standard rates without regard to weight. These plans are not available to individuals with insulin-dependent diabetes (that often accompanies obesity) and to those who have previously been declined for coverage. These plans typically last up to 6 months but a second policy is generally allowed to make a total of 12 months coverage.

When price is not a limiting constraint it makes sense to combine traditional major medical insurance with a supplemental coverage like Core Health Insurance (www.CoreHealthInsurance.net). This policy is not intended as a substitute for major medical coverage, but it pays cash indemnity directly to the policyholder. This insurance (or a similar plan) is currently available in most states through FreedomBenefits.net. This insurance does not cover all medical bills, but pays a specific list of charges without deductibles or co-payments.

Enrollment in health insurance does not automatically mean that the medical needs of an obese person are addressed. Large patients require extraordinary medical care and equipment that relatively few medical facilities are equipped to handle. Medical offices may not have scales and equipment for patients who weigh over 300 pounds despite the fact that accurate weight is crucial to prescribing many types of medicines. These patients may not fit on normal hospital beds, imaging equipment, wheelchairs or operating tables. Severely overweight people are far more likely to suffer from diabetes, arthritis and other chronic or lifelong medical conditions.  

I offer one-on-one financial planning assistance through OnlineAdviser to individuals who have difficulty finding available insurance and other help with managing the costs and risks associated with obesity. A limited consultation is free and expanded service is available on request.

Footnote:

 ¹ projected for 2030 according to the CDC forecast dated May 7, 2012.

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