What is 'Medical Underwriting'

Medical underwriting is the process of assessing the risk associated with providing health insurance coverage. Medical underwriting involves an examination and analysis of an individual’s medical information, which is used to determine how risky an individual is and, thus, how much that individual should pay for insurance. In some cases, the use of medical underwriting is restricted by law.

BREAKING DOWN 'Medical Underwriting'

During the medical underwriting process, insurance companies want to understand as much as possible about a potential policyholder before actually underwriting the insurance policy. The insurer will examine the medical history, demographics, lifestyle and other factors that relate to the individual’s medical needs, and, through actuarial analysis, make an estimate of the risk associated with providing medical or health insurance coverage. If an individual is considered a high-risk prospect, the insurer may decline to offer coverage, may charge a higher insurance premium, or they may set exclusions or limits to the amount of coverage offered through the policy.

The amount of due diligence an insurer does when considering a health insurance application depends on the resources it has available to conduct research into an individual’s medical history. The most comprehensive examination is referred to as full medical underwriting, or FMU. Full medical underwriting involves an extremely thorough analysis of an individual’s medical records. This process requires the health insurance applicant to provide a full medical history, and the insurer may contact the healthcare providers that the individual has visited in the past. It is the duty of the applicant to provide a full disclosure of his or her medical history.

Medical Underwriting Controversy

Advocates of medical underwriting say the process keeps individual health insurance premiums as low as possible. Critics of the practice maintain it unfairly stops people with relatively minor and treatable pre-existing conditions from obtaining health insurance. Diseases that can make an individual uninsurable include serious conditions, such as arthritis, cancer, and heart disease, but also such common ailments as acne, being 20 pounds over or under the ideal weight and old sports injuries. About 5 million of those without health insurance are considered "uninsurable" because of pre-existing conditions.

In the United States, the Affordable Care Act (ACA) changed many of the rules associated with the way insurers qualify individuals looking for health insurance. The ACA prevents health insurers from denying coverage to an individual, and from placing limitations on a policy for pre-existing medical conditions. However, this may change as it is currently unclear what, if any, of these changes will be rolled back by the current Presidential administration. 

RELATED TERMS
  1. Medical Cost Ratio - MCR

    Medical cost ratio is the comparison of a health insurance company's ...
  2. Commercial Health Insurance

    A type of health insurance that covers medical expenses and disability ...
  3. Underwriter

    An underwriter is any party that evaluates and assumes another ...
  4. Pre-Existing Condition Exclusion ...

    Pre-Existing Condition Exclusion Period is a health insurance ...
  5. Underwriting Cycle

    Underwriting cycle refers to fluctuations in the insurance business ...
  6. Insurance Coverage

    Insurance coverage is the amount of risk or liability covered ...
Related Articles
  1. Insurance

    4 Reasons Why Waiting To Buy Life Insurance Is a Bad Idea

    Understand the benefits of applying for and securing life insurance coverage while you are young and healthy, and learn the cost of waiting to get coverage.
  2. Insurance

    Accelerated Underwriting Makes Life Insurance Easy

    A new development called “accelerated underwriting” is making it faster and easier for people to obtain life insurance.
  3. Investing

    Methods of Handling Risk: A Quick Guide

    Discover the five methods to manage pure risk, and learn how they can be implemented to mitigate risk with health and life insurance.
  4. Insurance

    Overcoming Life Insurance Eligibility Issues

    There are many issues that can keep you from obtaining life insurance at a reasonable rate.
  5. Insurance

    What Prequalification and Underwriting Do

    Learn now prequalification and underwriting can help you buy the policy that best meets your needs.
  6. Insurance

    Get Sale Prices On Healthcare With Discount Plans

    Medical discount plans can help the uninsured or underinsured afford better healthcare.
  7. Financial Advisor

    All About Impaired Risk Annuites and Insurance

    What are impaired risk insurance products and understanding life insurance rate classes, table ratings and flat extra premiums.
  8. Insurance

    Common Life Insurance Questions Answered

    Choosing life insurance can seem daunting at first. Here are answers to commonly asked questions.
  9. Insurance

    4 Things That Keep You From Getting Life Insurance

    We look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
RELATED FAQS
  1. Why is my insurance premium so high/low?

    Insurance premiums can be affected by many factors including: type and amount of risk size of deductible amount of coverage ... Read Answer >>
  2. What are insurance sector companies usual profit margins?

    Understand what the average profit margin for a company that serves in the insurance sector and what factors can affect the ... Read Answer >>
Hot Definitions
  1. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  2. Current Assets

    Current assets is a balance sheet account that represents the value of all assets that can reasonably expected to be converted ...
  3. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
  4. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  5. Cost of Debt

    Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure.
  6. Depreciation

    Depreciation is an accounting method of allocating the cost of a tangible asset over its useful life and is used to account ...
Trading Center