Insurance Discrimination on the Basis of Health Status: An Overview of Discrimination Practices, Federal Law, and Federal Reform Options

Actuarial underwriting, or discrimination based on an individual's health status, is a business feature of the voluntary private insurance market. The term "discrimination" in this paper is not intended to convey the concept of unfair treatment, but rather how the insurance industry differentiates among individuals in designing and administering health insurance and employee health benefit products. Discrimination can occur at the point of enrollment, coverage design, or decisions regarding scope of coverage. Several major federal laws aimed at regulating insurance discrimination based on health status focus at the point of enrollment. However, because of multiple exceptions and loopholes, these laws offer relatively limited protections. This paper provides a brief overview of discrimination practices, the federal law, and federal reform options to manage discriminatory practices in the insurance and employee health benefit markets.