Why do health insurance companies underwrite?

For the vast majority of US residents, they don't. According to the US census bureau, over 80% of the country is covered by group insurance or provided by government. Most of the rest are either insured already, covered but not signed up for Medicaid, or have chosen not to be insured.

For the 35 million or so who may face underwriting, it is a real issue.

So, why do insurance companies underwrite? Basically, to make sure that all policyholders have the same chance to have a claim. That's how the premium was set. They did not set it to accommodate some percent who already had an imminent loss. If they did, their premium would be higher than competitors, and they would not get the business anyway. So, they have to make sure that something that has already happened is not covered. No difference between health insurers and life insurers who are faced with someone with a terminal illness, or homeowner insurers who are faced with a house that is already burned down.

For 80% of the insureds, insurance companies do not underwrite, because the employers pay the total bill. In essence, the healthy subsidize the unhealthy within the employer group. The insurance company does not have to risk the loss. But for individual issues, there is no one to subsidize the unhealthy.

It is a reality that we should all recognize. Insurance companies have no choice about whether to underwrite. We don't like it; they don't like it. We need to work together to develop an approach that recognizes that and quit trying the simplistic dictate of telling them to stop.