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What is a medical insurance rider?

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A brief overview...
  • Medical riders are amendments to standard health insurance agreements
  • Riders can add coverage as the parties may agree
  • Riders usually limit and exclude coverage to protect the insurances companies against unwanted risks
  • The Affordable Care Act limited then abolished most uses of riders to reduce insurance company risks

A medical insurance rider is an amendment to a standard contract for health insurance. The rider can either add or exclude coverage for some particular condition, body system or body part. The practice of riders was regulated by state insurance authorities.

States approved a wide range of additions and exclusions as insurers picked and selected the risks they would assume and the prices they charged for them. The practice of insurance riders was limited in 2010 and abolished in 2014.

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Insurance Industry Reform

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Medical riders were a feature of the health insurance business before the enactment of health care reform in the Affordable Care Act. Insurers had free reign to pick and choose clients and the conditions they would cover.

Insurance providers could modify prices in accordance with their risk assessments from medical underwriting. The results were inconsistent, expensive, and largely unfair to consumers, and to women in particular.

The Individual Mandate

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A primary reform in the Affordable Care Act was the requirement for universal health insurance. While the Congress could not agree on a single payer or public option for the system, the lawmakers did agree that everyone needed insurance, and to permit private insurers to offer the required insurance.

The law applied standards for rating and equal treatment of applicants without undue regard to individual traits and pre-existing conditions.

Universal Acceptance

The Affordable Care Act requires insurers to accept every applicant and with a small exception to offer them similar terms. This limited use of traits is a departure from the previous system that relied upon industry discretion. They use medical riders to exclude or limit conditions and to add coverage at higher prices.

Community Rating

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Community rating is a system for setting terms and prices for heath insurance that uses a group rather than individuals as its reference. The use of modified community rating was a major reform of Obamacare as it put consumers on an equal footing for prices and terms of coverage.

Insurers could no longer punish consumers for their health, DNA, gender or other individual factors by charging more.

Pre-existing Conditions

Before the enactment of the Affordable Care Act, denial of coverage was the typical industry response to pre-existing conditions.

Insurers used medical riders in situations indicated by medical underwriting as exclusions. They also used medical riders to add coverage and set higher costs for specific risks.

For example, a medical rider might cover a woman of childbearing age and require higher payments than a male with comparable age and health risks.

Types of Riders and Results

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Health insurance riders usually served the interest of the insurance companies. Even while adding coverage, the insurers would charge higher prices as they chose. Most of the additional coverage used by inclusive riders became standard features of Obamacare and major medical coverage after 2010. The items below describe riders and their typical uses.

  • Exclusionary Rider – This is a practice that protects insurance industry profits at the expense of an insured individual or family. This practice also occurs in group insurance situations in which a particular employee or dependent gets a different offer than the rest of the group because of an insurance risk. Exclusionary riders permanently exclude the designated risk from insurance coverage.
  • Exclusion Periods – Some riders provide a period of time in which insurance will not cover a particular body system or condition. This is a temporary matter and upon its expiration either the coverage begins, or the policy will end. In some guaranteed acceptance situations, insurers may still use exclusion periods to modify their risks.
  • Coverage Riders – Consumers can still add coverage to meet their preferences above and beyond the guarantees and protections in the Affordable Care Act. One should note that Obamacare incorporated many subjects of add-on riders before 2010 in the essential health benefits. For example, the essential health benefits cover maternity and pre-natal care.

Exceptions to Community Rating

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Obamacare required insurers to abandon the practice of medical underwriting and medical riders to set price. These practices used pre-existing conditions o exclude applicants or charge them higher premiums. The list below describes the limited exceptions to community rating that use individual traits.

– Age

The Affordable Care Act permits insurers to charge up to three times the amount for the oldest members of a group compared to the youngest. This exception has a fact basis as older persons require significantly higher levels of medical care on average.

– Location

The Affordable Care Act permits price discrimination based on location. The physical location of insured parties can have a dramatic effect on the availability and costs of medical care.

– Tobacco Usage

Obamacare permits discrimination against tobacco users. Facts show that tobacco usage leads to a high incidence of serious and fatal diseases. The law encourages cessation and rewards it with lower rates after cessation.

The Basic Definition

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In simple terms, a medical insurance rider is a change in a standard health policy that adds, limits, or excludes things from coverage. The effect is more fundamental since the Affordable Care Act reforms removed the power to use riders to force conditions on consumers that were largely unfair to them.

Consumers have a strong interest in uniform pricing that does not use individual traits to charge higher prices or lower coverage.

Medical Riders Can Add or Limit Coverage

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Medical riders used to play a much bigger role in health insurance before enactment rather than after the Affordable Care Act healthcare reforms. Insurers used riders, or insurance policy amendments, to exclude, delay, or add coverage to the standard agreements.

Obamacare largely abolished riders in favor of community rating and limited use of age, location, and tobacco usage as individual factors. Comparison shopping is a consumer-oriented tool for finding high-value health insurance.

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