Until I started the process of applying for a mortgage, I had never really considered what underwriting was. I knew underwriting had something to do with considering risk and that you found it in finance and insurance. That was about the extent of my knowledge.

Now I know that within the context of my mortgage, an underwriter's job was to collect all of my important financial statistics and decide whether I had the means to pay back the money I borrowed. Lucky for me, they decided I was a good risk.

Underwriting has gained some attention recently due to the role underwriters play in health insurance, but this time their role is more sinister in its outcome. A health insurance underwriter takes my health information and weighs what they see as the chances of me getting sick. If they decide I'm a high risk, they'll charge me more. If the risk is too high, they'll reject me.

The problem with this plan, however, is that health insurance companies set the bar so low that almost no one is considered a low risk. Perhaps this is why they've had record profits, with stocks rising 428% from 2000-2007.

It is an industry sector badly in need of regulation, as this article from Slate.com points out:

How badly are these reforms needed? To find out, I read through a 2009 document that BlueCross BlueShield of Texas provided its agents to guide them about who may and may not purchase a policy, and on what terms. The underwriting guidelines are quite draconian, though not dramatically worse than others that have leaked out...

The first hurdle to clear concerns weight...The next hurdle is much higher. It's called (with a refreshing absence of euphemism) the Automatic Decline List, and it consists of 143 diseases, from Addison's Disease to periarteritis nodosa, that will immediately disqualify you for coverage. It's "not all inclusive," we are warned, but if a potential customer has any of these then the agent must show him the door. Hemophilia? Disqualified. Penile implant? Get lost, you sissy! Pregnant? Begone, slattern, until after your post-partum checkup. Organ transplant? Unless it was your cornea, we got nothing to talk about...

Moving on to the Standard Rate Condition List of things that disqualify you for the preferred (but not standard) rate, I see "Anxiety/depression" (I'm busted), "GERD (acid reflux)," "Headache" (presumably that means more than the usual kind), "Herpes," "Temporomandibular Joint Disorder," "Tobacco use" (that's fair), and "Tourette's Syndrome" (the handbook offers no guidance about what a Tourette's sufferer is likely to say once he's been broken the bad news).

A few years ago, I was a healthy, non-smoking and active 25-year-old. When I found myself suddenly laid off from a small non-profit that didn't have a COBRA option, I tried to purchase it on the individual market.

Denied.

They claimed the occasional headaches I got disqualified me from coverage. No matter that my doctor wrote a letter on my behalf saying that in her professional medical opinion, there was nothing troublesome about an occasional headache.

After reading Timothy Noah's full piece, I wondered as he did how anyone is eligible under these underwriting rules.

Most of these restrictions would become illegal if health reform becomes law. To balance the fact that this would suddenly make lots of "risky" people eligible for insurance, the reforms also require that healthy people get covered too.

Reform sounds better all the time.