Health Insurance Declination Rate Increases to More than 20 percent

The application rejection rate for the health insurance industry has increased to more than one-in-five applications (22 percent), according to “Health Insurance Application Rejection Rates Rising? A state-by-state look at health insurance declination rates,” from HealthPocket Inc. That marks an increase from one-in-seven rejection rate for individual and family insurance applications in 2010, as per a congressional study of the largest for-profit insurers.

“Clearly there is great variability across states and within states in terms of how frequently an insurer rejects a health insurance application, but nationally it seems to be occurring more frequently than industry analysts had assumed,” said Kev Coleman, head of research and data at HealthPocket. “What is unclear is whether some insurers have increased their declination rate in order to improve risk pool health and profitability prior to 2014, when insurance companies can no longer reject applications based upon health status or pre-existing medical conditions.”

The study also found a very wide variation in rejection rates by health insurers and within insurance companies across different markets. Kaiser Permanente plans in Georgia, for example, have a declination rate of 34 percent, but in Hawaii that company’s declination rate is 22 percent.

Some nonprofit insurers were found to have higher declination rates than for-profit insurers, such as Kaiser Permanente in Georgia, which has a declination rate of 34 percent, compared to for-profit insurer Humana, which has a declination rate of 23 percent in that same state.

As per the report, states with the highest rejection rates nationally include:

1. Montana (45 percent)

2. Alabama (40 percent)

3. District of Columbia (37 percent)

4. Arkansas (35 percent)

5. Alaska (34 percent)

As per the report, plans with the highest declination rates include:

1. South Dakota’s John Alden Life Insurance Company (73 percent)

2. Utah’s Assurant Health (71 percent)

3. North Dakota’s Assurant Health (58 percent)

4. Kentucky’s Time Insurance Company (56 percent)

5. Idaho’s Assurant Health (56 percent)

A health insurance application rejection can negatively affect applications to other insurers, which typically ask about previous denials when evaluating an application, which could be a serious issue for consumers, the report said.

HealthPocket said the analysis was based on publicly available insurance records of 9,450 plans for individuals and families under age 65 to determine the average declination rate of health insurance applications, and compare that average to the declination rate of individual insurers.