Health Insurance Application Denied? Here Are 5 Options

More than one fifth of people seeking health coverage are denied by insurers, with Montana, Alabama and Arkansas among the states having the respective highest rejection rates, according to a new study.

Twenty-two percent of applicants nationwide aren't approved for individual and family health plans, usually because of pre-existing medical conditions, says the HealthPocket report, " Health Insurance Application Rejection Rates Rising?"

"That's clearly the most obvious reason," says Steve Zaleznick, HealthPocket's executive director of consumer strategy and development. "Carriers are certainly taking that into consideration when they are doing their underwriting and determining what they want to take on in terms of risk."

He says that health reform provisions under the Patient Protection and Affordable Care Act that take effect in 2014 will prevent insurers from rejecting applicants with pre-existing health conditions, even those with major physical problems that could incur high hospital costs. But until then, consumers should be aware of what challenges they may face securing coverage in their home states. (See: " Health reform sticks: Now what?")

"We want to promote consumer research and get people to ask the right questions when seeking health insurance," says Zaleznick. "That's the prime reason for the report."

HealthPocket, a Sunnyvale, Calif.,-based group that analyzes medical insurance firms across the country, based its study on Department of Health & Human Services data for more than 9,400 insurance plans. The report listed several states where insurers frequently decline applicants:
  • Montana, with a 45 percent rejection rate for health coverage
  • Alabama, 40 percent
  • District of Columbia, 37 percent
  • Arkansas, 35 percent
  • Alaska, 34 percent
  • New Mexico, 30 percent
  • North Dakota, 29 percent
  • Oregon, 29 percent
  • Maryland, 29 percent
  • Pennsylvania, 27 percent
  • Delaware, 27 percent
  • West Virginia, 27 percent

The report (which includes health insurance rejection rates for every state) doesn't specify why it's harder to gain coverage in these states. But Zaleznick notes that fewer health insurers tend to operate in these states and may be able to impose tighter approval guidelines because they face less competition.

As for the states that don't reject any applicants -- Zaleznick points to New York and Massachusetts as two of the better known -- the reason is simple: they already have laws mandating that insurers provide coverage, regardless of a person's medical issues.