The Health Insurance Portability and Accountability Act of 1996 established guaranteed renewability as a fixture of individual and group health insurance policies. The provision was included as a means of protecting high-risk candidates and ensuring access to coverage in the event that an individual's health deteriorates.

Description

According to the American Academy of Physical Medicine and Rehabilitation, a guaranteed renewable policy cannot be discontinued due to high cost insurance claims. If the insured complies with the plan guidelines and pays premiums, he is guaranteed a renewal each year.

Exceptions

The privilege of guaranteed renewability is forfeited when the insured uses fraudulent information on the application form. A policy can also be canceled if the insurance provider no longer offers the consumer's current plan, the company withdraws from the market, or the consumer moves outside of the coverage area.

Penalties

When an insurance carrier discontinues its group coverage program in a particular state, guaranteed renewability is void, but the company is subject to a five-year ban in that state.

Considerations

Premiums for individual policyholders cannot be raised annually based on medical underwriting. However, individual premiums can increase following claims with projected high risk factor, or for an entire class of policyholders with similar insurability.

Benefits

Guaranteed renewability prevents insurance carriers from canceling coverage when changes in health status places the insured in the high-risk category. It also allows high-risk consumers to lock in lower premium rates.

Source:

AAPM&R: Health Insurance Portability and Accountability Act

WPS Health Insurance: HIPAA

Investopedia: Guranteed Renewable Policy