Reapplying for an insurance plan–why so difficult?

We have had several friends seek to reapply for a similar or different insurance plan with the same company only to discover that sometimes it is difficult to get coverage.

Here is a scenario: You are on plan “A” with company “XYZ.” You want to switch to plan “B” with the same company with better benefits. The company “XYZ” will send you an application and treat you as a brand new client. They will not even consider the fact that you have been on plan “A” for five years.

Or maybe you have a deductible of $5,000 on plan “A,” and you are requesting, after five years, to reduce your deductible to $2,500. In this case, you will need to apply for the insurance coverage as if you had never been on the plan. Why is this? First of all, insurance companies are always tightening their underwriting guidelines. Five years ago they may have covered allergies. Now they have changed, and no longer cover allergies. They need to screen you through the new underwriting guidelines to make sure you haven’t developed allergies. Second, when they decrease your deductible they are increasing their risk. Since you last applied, have you developed allergies or something else that increases your need for medical care? A lower deductible to cover the allergies would be advantageous to you, but a big disadvantage to the insurance company.

To raise your deductible, you generally only need to fax a letter of request to the insurance company requesting the change. Why so simple? Because, by raising your deductible you are increasing your personal risk and decreasing the risk of the insurance company.

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