Ralf Burgert had no idea how costly toenail fungus could be.

The San Rafael resident got rid of the common infection by treating it with the prescription medication Lamisil. It was the last thing on his mind when he applied for a health insurance policy on the individual market a short time later.

He could not believe the response: Because of the toenail fungus, an insurer informed him, he would be in a higher-risk insurance pool with a 50 percent jump in premiums. Burgert was flabbergasted.

"I’m in perfect health," said the 43-year-old nurse practitioner. "Except for the toenail thing, I haven’t had any illnesses. Of all the diseases you can have, it’s as close to a harmless one as you can get. All it does is make your toenails white and kind of thick-looking."

The insurers are "just doing it because they can," he said.

Consumer advocates say they are often perplexed by the minor health issues that can create serious problems for people seeking health insurance. Each company sets its own policies.

Common conditions such as asthma, sleep apnea, allergies, ear infections, mild depression, migraine headaches, and joint sprains can trigger denial of insurance or higher premiums, the state learned in 2006 when it required insurers to submit information on their underwriting policies.

"The things that people have been denied for raise the question if simply living is a pre-existing condition," said Anthony Wright, executive director of Health Access California, a consumer advocacy group.

In 2014, when new health reforms take effect, insurance companies will no longer base coverage decisions on a person’s health history, a practice known as medical underwriting.

Applicants who have medical issues will be guaranteed coverage at standard rates, and most people will be required to obtain insurance.

But until then, many people with pre-existing health conditions will continue to face the same hurdles that became a major talking point in the drive to health reform.

Consumer advocates say they want to make sure that insurance companies do not become more aggressive with denials or dramatically hike premiums for those with pre-existing conditions during the next four years.

"The insurers now compete based on their ability to deny (coverage) to anybody who might actually need care," Wright said. "That will change, but not in the near-term, and that’s a problem we will have to reckon with.

"It’s particularly important to be vigilant between now and 2014," he said. "We would like to see that the regulators closely monitor the denial rates for pre-existing conditions and the reasons for the denials."

Insurance industry representatives call such concerns misguided and say they do not expect any major changes in underwriting policies before 2014.

"We have a competitive market in California, so health plans want people to buy their coverage, and they will charge a competitive price," said Patrick Johnston, president and CEO of the California Association of Health Plans.

He noted that the insurance industry generally supported eliminating medical underwriting and guaranteeing coverage to applicants, as long as the change came with a government mandate that most people buy insurance.

Pre-existing conditions are not an issue for the 21 million Californians who have group insurance, usually provided through employers, because group plans accept people regardless of their medical histories.

But it can be a big worry for the 2.5 million Californians who buy insurance on the individual market.

California and many other states will soon set up new high-risk pools for those who have found it difficult or impossible to obtain coverage.

California will receive $761 million to fund this new pool, a dramatic increase over the $33 million for the state’s existing high-risk pool. But this money will not cover everyone with pre-existing conditions, and some may find the still-to-be-determined premiums too costly.

As a result, many people with pre-existing conditions are expected to remain in the individual market during the next four years and experience frustrations as they attempt to find coverage, consumer advocates say.

People have been rejected for such common conditions as acne and high blood pressure, said Judy Dugan, research director for Consumer Watchdog.

"If you are pregnant, (insurers) will run the other way screaming," she added. "They don’t want to insure a baby until they have looked it over to make sure it’s absolutely healthy."

A Fremont doctor said she was shocked when one insurer rejected her application because of her eczema, seasonal allergies and a brief bout with viral meningitis, despite a full recovery.

At age 45, Angelique Green, chief medical officer of the Tri-City Health Center, considers herself very healthy, with low cholesterol. She has never smoked, and her hobby is hip-hop dancing.

"To say no to somebody and not even try to work with them, that’s just wrong," she said. "It was very frustrating."

Johnston would not comment on individual cases, but he said the coverage decisions make sense from the insurers’ standpoint, and they help keep plans financially viable. The goal is to avoid having an insurance pool with mostly sick people whose medical bills far exceed the premiums they pay, he said.

Group plans can insure everybody because they have a large pool of generally healthy employees and their dependents.

"As groups get very large, then the risk is spread more widely, so the really high-cost care for a few people is balanced by perhaps hundreds of people who are generally quite healthy," he said.

But in the smaller individual market, actuarial analyses determine what the typical costs are for someone with a particular condition, or for someone who uses a specific medication. The firms deny coverage or charge higher premiums when they deem conditions too expensive.

Sometimes, a seemingly minor condition may lead to bigger problems, so insurance companies base decisions on that likelihood, said Nicole Kasabian Evans, vice president of communications for the California Association of Health Plans.

In New York, Massachusetts and New Jersey, people pay the same standard rate for premiums, regardless of their health status. But Johnston noted that because this is not coupled with a mandate to buy insurance, "sick people get great coverage, and healthy people drop out and the prices go up far in excess of (what happens in) California. So it’s an alternative model, but it comes with much higher costs and a lot of people having no coverage."

Nationwide, only a small percentage of people are rejected for coverage, said another insurance industry representative. A 2009 survey of insurers by America’s Health Insurance Plans found that they offered coverage to 87 percent of applicants who underwent medical underwriting, said the group’s spokesman, Robert Zirkelbach.

Of those offered insurance, 29 percent were quoted standard premiums, 36 percent were at lower rates, and 34 percent were at higher rates, the study found.

Consumer advocates such as Wright say people with pre-existing health conditions often encounter serious problems in obtaining coverage that hopefully will be resolved in 2014.

"Many people find it bewildering that it’s exactly the people who need coverage who are the ones who cannot get it," Wright said.

"As more and more people get denied for smaller and smaller medical problems, both the industry and individuals have figured out that this is not sustainable," he said. "The system is broken."

Redwood City resident Terri Mullen agrees. When she experienced work-related stresses in 2008, her doctor suggested she see a therapist and try anti-anxiety medication. Little did she realize the problem this would cause.

When she later applied for an individual insurance plan, a firm told her she would be in a high-risk pool with much higher premiums because the therapy and medication were signs of a serious mental illness.

Now, she says, "I’m not stressed out anymore — I’m mad."

CALIFORNIA’S HIGH-RISK POOL
The state will soon set up a new high-risk pool for people whose medical issues make it difficult to get health insurance. For notification when applications are available, send your name, address, phone number and e-mail address to [email protected].

Contact the author, Sandy Kleffman, at: 925-943-8249.