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Tony Novak, CPA, MBA, MT
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Health insurance for overweight applicants
by Tony Novak, CPA, MBA, MT
, revised 5/9/2011
About 36% of U.S. adults are obese, according to theCenters for Disease Control and Prevention. The number is projected to continue to grow to more than 42% in the future1 and 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.
Obesity makes 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. As a result most obese individuals are eligible for coverage that is legally mandated insurance plan rather than a commercially viable option. The rates under a mandated plan are set lower than the individual’s expected medical costs and those costs are subsidized by government subsidies or premium payments of other healthier members of the health plan.
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 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. The state of new Louisiana launched a study to examine the financial effects of gastric by-pass surgery on the overall health care costs of obese patients. If the results of this study are favorable, we might expect to see gastric bypass treatment routinely covered procedure under health insurance plans that are defined to cover “ordinary and necessary medical expenses”.
For years health insurance companies have charged extra premiums to overweight members. 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 unaffordable. Some health plans are simply not available to applicants who weigh more than allowed by the underwriters.
In small business health insurance plans, insurance is always available to every full-time employee regardless of weight or medical history. 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 25% for everyone in the group and may cause resentment among the lighter weight employees. Even in larger groups and Blue Cross plans that use a “one price for all” the high cost of treating obesity has become a politically charged issues.
There are still a few low cost health insurance plans available without regard to the applicant’s weight. In most states immediate issue short term major 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 available in all states except MA, NJ, NY and VT.
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.
Another consideration is the schedule benefits “mini-med” coverage through Core Health Insurance (www.CoreHealthInsurance.net) a low cost policy that is available to everyone under age 65 in approved states. This policy is not intended as a substitute for major medical coverage, but it pays cash indemnity directly to the policyholder. This insurance is currently available in most states.
This insurance does not cover all medical bills, but pays a specific list of charges with no deductibles or co-payments. One distinct advantage of this plan is that it pays for costs associated with pre-exiting medical conditions after the policy has been in force for six months.
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. Most medical offices do not have scales to weigh patients 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.
We 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.
1 projected for 2030 according to the CDC forecast dated May 7, 2012
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