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Insurers reject one in five medical insurance applications Posted: March 26th, 2013

By Maryalene LaPonsie

Americans searching for low cost health insurance coverage may find they have difficulty getting their application approved by some companies. An analysis of nearly 9,500 health insurance plans found, on average, insurers reject 22 percent of all applications for the coverage they receive.

The analysis, conducted by the website HealthPocket, also found significant variation in rejection rates based upon state and company. The insurer with the highest rejection rate turns down nearly three-quarters of all applications it receives.

States and insurers with the highest rejection rates

While more than one in five applications are rejected nationwide, some states have significantly more applications turned down.

According to HealthPocket, the following five states and jurisdictions have the highest rejection rates:

  • Montana: 45 percent
  • Alabama: 40 percent
  • District of Columbia: 37 percent
  • Arkansas: 35 percent
  • Alaska: 34 percent

Meanwhile, insurers in five states have the distinction of turning down zero applications: Maine, Massachusetts, New Jersey, New York and Vermont.

The number of medical insurance applications that are rejected can also vary significantly based upon the company. The analysis found health insurance plans from the following companies rejected the greatest percentage of applicants.

  • John Alden Life Insurance Company in South Dakota: 73 percent
  • Assurant Health in Utah: 71 percent
  • Assurant Health in North Dakota: 58 percent
  • Time Insurance Company in Kentucky: 56 percent
  • Assurant Health in Idaho: 56 percent

Interestingly, some non-profit insurers had higher rejection rates than for-profit plans. For example, HealthPocket notes non-profit Kaiser Permanente turned down 34 percent of its Georgia applications while for-profit Humana only rejected 23 percent of the applications it received from Georgia residents.

Health reform may reduce rejections

Although the analysis did not delve into the reasons for the rejections, they may stem from insurers trying to weed out more costly consumers. Currently, health insurance plans can decline to cover those with pre-existing conditions who may be more likely to submit claims.

However, in 2014, the Patient Protection and Affordable Care Act will prohibit medical insurance companies from rejecting applications based upon health status or pre-existing conditions.

While the health reform provision should improve access to coverage for those with chronic medical conditions, it remains to be seen how it will affect the availability of affordable health insurance to all consumers.

Proponents of the law say the health insurance mandate scheduled for 2014 will offset an influx of consumers with pre-existing consumers while critics argue not allowing health insurance plans the flexibility to turn down individuals with expensive illnesses may mean higher premiums for everyone.