Why Old Health Insurance Policies are Bad

A consumer who has a health insurance policy that is no longer being sold by their insurance carrier will typically pay more for coverage than they should. This is something known to many insurance agents, but many consumers are unaware of this fact and wind up holding on to more expensive policies.

Discontinued Medical Insurance Policies Cost More

This is because the claims history for a particular policy series drives the price for that policy series. If there are more medical claims for the old policy series verses the new one, the new one will cost less. Almost invariably the discontinued health insurance policy series will have more claims.

More Benefits Myth

Often consumers will want to hold on to the old policy because it has more benefits. A logical assumption to make is that if the new one cost less, it must cover less. Sometimes this will be the case. However, state governments tend to add to the things they require in an insurance policy, this is usually not the case. Even if the old policy is more robust the added cost will often not be justified by those benefits. Also the cost difference between the older policy and the newer one will almost definitely increase as time goes on.

Change Health Plans Now or Risk Paying More Forever

When it gets to the point where you are ready to switch you or a family member may not be healthy enough to qualify for a different policy, so switch as soon as possible.

If the Insurance Carrier Pays More You will Too

Newer policies series cost the health insurance company less because they insure healthier people than discontinued policies. When you apply for an underwritten medical insurance policy, you will be asked a series of questions about your medical history. You may be asked to have a medical exam and your medical records may be requested from your doctor or doctors. If you pass the screening and have your health insurance policy approved you are unlikely to have a significant claim in the next year or two.

Of course some unlucky individuals will have significant claims the day after they purchase their policies. But if you look at a random group of 100 people who qualified for an underwritten health insurance policy 12 months ago and compare their claims for the last year with the claims of 100 people who were approved for the same policy 12 years ago, you will find a big difference in what they cost their insurance company. They have had 12 years to gain weight, to develop health problems that would be preexisting conditions if they applied for health insurance today.

People who have the old policy and people who have the new policy are aging at the same rate. However, their underwriting is getting older. A twenty year old woman who hasn’t been underwritten in five years may be significantly more costly to the insurance company than a sixty year old man who was just checked out by his insurance company and found to be in excellent health.

If you are healthy and can find another health insurance policy that meets your needs, switch to that other policy when your current policy is no longer offered to the public. The cost for both insurance policies will probably rise over time, but you may find that the discontinued one will rise twice as quickly. If you wait until the price goes up you may find that you are less healthy at that time and your pre-existing condition forces you to stay with the more expensive plan.