Dealing with a pre-existing condition
Vincent Blair, a veteran health insurance broker based in Webster Groves, Mo., says that prior to the introduction of CSDs several years ago, insurance companies had three ways of dealing with consumers with health conditions. They could decline them outright, exclude the specific condition with an exclusion rider, or "rate up," meaning they would charge more for the policy.
"You have some companies that say we don't put exclusions on any conditions. Well, that sounds good, but they decline quicker. Or they'll include the condition but charge you more money, typically on things like blood pressure or cholesterol," says Blair. "But they can't rate up an arthritic hip because there's no premium they can charge to cover a $40,000 hip replacement, so they exclude it."
In a worst-case scenario, the consumer would bear the full burden of treatment costs for their condition without the benefit of the insurer's network-discounted rates.
Assurant Health, a health insurer based in Milwaukee, then introduced the CSD, a consumer-friendly alternative to the exclusion rider that allows the insured to take advantage of discounts with network providers.
CSD vs. exclusion rider
"It was a softer version of the pre-existing condition exclusion," says Michael Morrisey, professor at the University of Alabama at Birmingham's School of Public Health. "What happens is you pay whatever the insurer has negotiated with that doctor out of pocket rather than through the insurance until you hit the deductible, then the insurance takes over."
Under a condition-specific deductible offered by Humana, consumers with health conditions may qualify for in-network deductible amounts of $2,500, $5,000 or $7,500; out-of-network deductibles double to $5,000, $10,000 or $15,000.
While it's comforting to know the maximum amount you'll face out of pocket for your condition in the coming year, Blair says it's the access to the insurer's re-priced rates that really sell a CSD.
"If you had an exclusion rider on your knee, that's an uncovered expense and doesn't get negotiated. So along comes Assurant and says, 'We'll cover you and put a $15,000 deductible on your knee.' Why this is so genius is, they already know that if you have a torn meniscus, the bill is not going to go past $15,000, so they're going to be out nothing, and you get the negotiated rate!"