Underwriting decides whether an applicant is accepted and at what price. The exam focuses on the rules that protect applicants along the way, most of them federal.
Consumer reports and the FCRA
Insurers often use consumer reports in underwriting, and the Fair Credit Reporting Act sets the rules:
- Investigative consumer reports may be ordered only if the applicant is told in writing, no later than three days after the report is first requested.
- Medical information may be obtained only with the consumer's consent, given orally, electronically or in writing.
- If insurance is denied, rates are increased, or a policy is terminated based even partly on a consumer report, the insurer must send an adverse action notice naming the reporting agency. The notice must tell the person of the right to a free copy of the report if they ask within 60 days.
HIPAA limits
- A health plan may not use or disclose genetic information for underwriting. Certain long-term care insurers are the exception.
- A health plan may make enrollment depend on an authorization requested before enrollment, if the authorization is for its eligibility, enrollment, underwriting or risk-rating decisions.
Health coverage that cannot be underwritten
Marketplace plans must cover pre-existing conditions and cannot charge more for them. A group health plan that offers dependent coverage of children must make it available until they turn 26, without restricting it by financial dependency or residency.
Long-term care is still underwritten
Most individual long-term care policies require medical underwriting. Some applicants can buy a limited amount of coverage, or coverage at a higher non-standard rate.