Are You Worried About Pre-existing Medical Conditions?

In recent weeks CCW Global has looked at a number of technical considerations and principles that are applied to insurance. This included the following topics:

• What is a Risk
• What is a Contract
• How Agency is created
• The application of Insurable Interest
• How Proximate Cause applies to claims.

One of the fundamental concepts of insurance is that it is a mechanism by which risk is transferred from one party to another, equitably, for a pre-determined fee. As we learned in our discussions of Risks, Contracts, and Proximate Cause, there are mechanisms available to both the policyholder and the insurance company to confirm the equity needed in any given insurance coverage.

We also learned through our discussion of Proximate Cause that there are specific types of risks under any given insurance policy, that may be excluded from coverage. Because of the way that proximate cause is applied to claims, any excluded risk (and consequence of that risk) is not covered under insurance.

This is a critical concern with one type of insurance in particular; Health Insurance.

Pre-Existing Conditions and Health Insurance

Health insurance, like all other forms of insurance, is a mechanism to transfer a risk to another party. In this particular instance, the risk (or peril) is any healthcare bills you may face. A simplistic way of explaining this would be to say that, by paying the insurance company a premium for coverage, the policyholder ensures that the insurer will pay for their medical treatment when they need it.

However, this is based on the assumption that it is only future medical risks that will be covered under the policy. The reason for this is that any medical risks in existence before or at the start of the policy are not, actually, risks; they are already happening.

Pre-existing medical conditions are often defined as any condition for which the policyholder has received a diagnosis, treatment, or medication, or any condition for which they have displayed symptoms, or were aware of prior to the commencement of the insurance.

Under the core definition of insurance, risks must be exchanged equitably for the insurance to work. When looking at health insurance, existing medical conditions fall outside the bounds of the definition of insurance. Asking to obtain pre-existing condition coverage is almost like trying to purchase Fire Insurance on a property which is currently burning down.

In most cases, because Hong Kong health insurance is normally designed to protect you against the cost of future medical expenses insurance companies will generally exclude pre-existing conditions from coverage under the plan. Although, it is important to note that there may be opportunities for a policyholder to include the pre-existing condition for coverage under their health insurance plan.

How Does Insurance Handle Pre-existing Medical Insurance?

As Pre-existing medical conditions, for the purposes of health insurance, are not risks but rather facts, these conditions are normally excluded from coverage under a policy. This is obviously concerning, especially when considered in line with the concept of Proximate Cause and how causation applies to understanding both claims and insurance.

Because the proximate cause of a claim impacts all following losses, the nature of the original peril must be defined. Risks are normally classed into three categories, insured, excluded, or uninsured. Insured risks are always covered under insurance. Uninsured risks leading to insured risks are also covered, because the scope of loss falls within the policy.

However, excluded risks, and all subsequent losses from that risk, are never covered. These risks have been specifically excluded from the protection afforded by insurance, as well as any subsequent perils that the excluded risk may cause.

With pre-existing conditions, it is important to note that both the original condition and any subsequent conditions related to it are normally excluded from the coverage offered by both Hong Kong and International health insurance plans. There are 3 exceptions:

Coverage After a Moratorium

A moratorium can also be called a Waiting Period. If a policy offers a moratorium in order to cover a pre-existing medical condition, then the policyholder will need to be on their plan for a specific length of time (as determined by the insurer) during which they cannot display symptoms of the condition, receive treatment, nor medication.

Moratoriums can last as long as 3 years from the start of a plan, but more commonly are encountered in the 24-month range. For practical purposes, the policyholder will need to remain free of the condition for the full moratorium period in order for the condition (and its subsequent conditions) to be covered under the policy.

Coverage Via Premium Loading

In some rare circumstances the insurer may offer to cover a pre-existing condition in return for a higher premium. This is known as “Loading” the premium, and simply put means that the policy will have a higher cost for their insurance, but will get the pre-existing condition in question covered under the policy.

Coverage in return for a higher premium payment is rare, and not normally encountered. Whether coverage via loading will be offered for your pre-existing condition is entirely determined by the insurance company accepting cover.

Medical History Disregarded

The only way guaranteed to ensure coverage of a pre-existing health condition under a Hong Kong or international health insurance policy is through obtaining a Medical History Disregarded benefit.

Also known as an MHD benefit, the inclusion of this term on a policy means that, effectively, the policyholders have no medical history prior to the commencement of the insurance and that there is no possibility of pre-existing medical conditions. All medical conditions of a policyholder which exist prior to the start of a Medical History Disregarded health insurance policy can be covered under the plan.

However, obtaining an MHD plan is not simple. This type of policy is normally reserved for larger group health insurance customers and cannot be purchased on an individual basis.

Understanding Pre-existing Medical Conditions and Insurance

Pre-existing medical conditions are a great example of the complexity inherent in your insurance products. Because multiple principles of insurance are applied in how pre-existing medical conditions are handled under a health insurance plan, they offer insight into how these different concepts interact and work with each other.

In this case, we have:

• The risk. Both the risk of the existing health problems, but also future risks being covered.
• The contract. Understanding how the insurance deals with the pre-existing condition through the terms and conditions of coverage.
• Proximate Cause. The idea that a covered risk could have stemmed from an excluded risk and therefore be excluded.

Because Pre-existing medical conditions are so complicated, some health insurance applicants will attempt to hide or disclose these conditions from the insurer. But as we will learn next week when discussing Utmost Good Faith, this could cause far more harm than good.

If you have any questions about pre-existing medical conditions and how they may be handled under your Hong Kong health insurance policy, or you would like to learn more about the Hong Kong and International health insurance options available through CCW, please Contact Us to speak with an expert insurance broker today. You can also request a free quote comparing any of the insurance products we offer by completing the short form at the top of this page.