Nearly half, 45 percent, of health insurance applications filed in Montana are denied, according to a new analysis out from an insurance industry group, more than double the national average. Meanwhile, five states have a denial rate of 0 percent.
That’s a big difference. But starting in 2014, all of those variations are supposed to melt away. Under the Affordable Care Act (ACA), Americans seeking health insurance can no longer be denied because of a preexisting condition or other reasons. It’s called “guaranteed issue.” But the data released Thursday by Health Pocket, an independent health insurance analyst, demonstrates how big of a difference that provision will make in various states. For reference, the national denial average was 22 percent.
Montana topped the states with a denial rate of 45 percent. Alabama (40 percent), the District of Columbia (37 percent), Arkansas (35 percent) and Alaska (34 percent) rounded out the top five. The authors were not able to pinpoint the exact reason for the variations across states, though the lead researcher speculated that some companies might have increased their denials, within state law, to increase profits in recent years before the 2014 reforms kick in.
Here’s another possible contributor: of the 23 states with a denial rate higher than the national average, 14 have not passed so-called conforming legislation (which Governing explored in depth earlier this month). Conforming legislation is a state law that mirrors the ACA’s insurance reforms, including guaranteed issue, so state regulators can continue their traditional role in regulating insurance. It’s possible, though not certain, that states without such laws could therefore have been targeted for increased denials
On the flip side, five states -- Maine, Massachusetts, New Jersey, New York and Vermont -- had denial rates of 0 percent. Those states had already passed state laws that require guaranteed issue prior to the ACA’s passage. Governing covered those five states’ experience with the guaranteed issue policy in its June 2012 issue.
The question of whether guaranteed issue could work without an individual mandate was a central piece of the Supreme Court hearings on the law last March. The Obama administration actually argued that, if the Court were to toss out the mandate, it should eliminate guaranteed issue as well. The reason was that the mandate compels healthy people to get insurance, while guaranteed issue allows less healthy people to get it, too. Those two provisions work in tandem to ensure prices don’t spiral out of control when sicker people get health insurance.
The question was rendered moot, of course, when the Court ruled that the individual mandate was in fact constitutional. That assured that guaranteed issue would become a national regulatory requirement next year.
Hawaii, with a denial rate of 5 percent, had the lowest percentage of declinations among the 45 states without guaranteed issue.
Health Pocket based its analysis on U.S. Department of Health and Human Services (HHS) data on denials for 9,450 insurance plans sold to individuals and families. Plans for Medicare, Medicaid and employer-based insurance were not included.
States are shaded based on their percentage of insurance denials. Darker shades indicate a higher percentage. Click on a state for its exact denial percentage.
Insurance Rejection Rates Map
Source: Health Pocket, Inc.