Have you ever wondered when you apply for health or life insurance how the company knows whether or not to issue a policy, or how much your insurance premium should be? This has never been very clear to me. With all of the laws that exist about protecting private healthcare information, I was always puzzled about how the insurance companies actually gathered that information without me having to provide the contact information of every health care provider that I’ve received treatment from.
A little known organization called the Medical Information Bureau (“MIB”) provides part of the answer to this question. The MIB is an agency that maintains a database of medical information and medical history of individuals. Hundreds of insurance companies across the United States and Canada provide financial support to the MIB and use this database for insurance underwriting purposes.
The members of the MIB (insurance companies that support and subscribe to its databases) exchange information about individuals and their health care history. By doing so, the insurance companies are able to more accurately identify the health and mortality risks associated with an individual based on their medical history gathered by the MIB. This allows the insurance companies to keep insurance costs down for both the insured and the insurers.
Insurance companies typically review an individual’s application for insurance and then, if the underwriter (the professional who is trained to evaluate the risks associated with insuring an individual) needs more information to help him or her accurately underwrite the individual applying for insurance, then they will request a report from the MIB. In that report, certain information is provided that will indicate whether the individual has been diagnosed with a disease, has had a heart attack, has been hospitalized, has other pre-existing conditions, etc.
The information provided in the MIB report is somewhat vague in order to protect the privacy of individuals. But it at least gives the insurance companies enough information that they can make additional inquiries back to the customer about specifics in order to clarify anything that might be a red flag to the insurer.
For instance, the report may alert the underwriter that the insurance applicant recently had a visit to a dermatologist and that a surgical procedure was paid for by her health insurance. This would then likely lead to the underwriter requesting that the insurance agent gather more specific information from the customer about the nature of that surgery. Was it removal of a wart or mole, for instance? Or was it something more serious, say a treatment for possible Melanoma? The answer to that question could have a major impact on whether the insurance company should extend insurance coverage to the customer at all, or at least, what the insurance rating of the customer should be and therefore the amount of premium charged.
Additionally, the MIB report can help insurers determine whether a customer has provided inaccurate or misleading information about their health status in an effort to defraud the insurer. Without this ability to root out inaccurate information, an insurance company would most likely pay out far more in benefits than it could ever recoup in premium payments. The end result of that, of course, is the financial failure of the insurance company and lack of coverage for all of its customers. Not a good result at all.
The MIB provides an important service to both insurance companies and those who purchase insurance to maintain the integrity of the underwriting process and thereby allow the insurance companies to remain financially healthy and able to provide financial security for all of its customers who have legitimate claims for benefits.