Private Health Insurance in the U.S.
The private insurance market is divided into two main groups through which most Americans buy their health plans: group and individual. Group coverage is provided through an employer, who shares a portion of the premium costs with the insured worker. Under the new healthcare law, all full-time employees of a large company (over 200 employees) must be provided with medical plans for themselves, their spouse, and any dependent children. Small group coverage is another form of employer-sponsored insurance, which is more similar to the individual market, as small groups can range from 1 to 100 members, as defined by the Affordable Care Act. Large groups are unable to turn down members for coverage based on health status, which instead increases the premium for the entire group rather than on an individual basis.
Individual health plans are a less common option than group, but have expanded in membership over the years as less conventional employment opportunities arise. Approximately 15 million people purchase their own health insurance plans to date, and many who have tried and been unable to do so for health reasons, for which there were state and federal government-run options, the Pre-Existing Condition Insurance Plan (PCIP) and other high risk pools. This major discrepancy between group and individual plans has led to the new provisions that will become effective in 2014.
As a result, private individual plans are about to experience incredible changes, as underwriting will be heavily regulated by federal law, and health insurance companies can no longer discriminate against applicants based on their gender, health status, or medical history. Until the new law has taken effect (and an additional option for individuals is offered – see below), these remain important determinants as to whether or not a person would be approved or charged more for coverage.
Additionally, the private market is varied in its product offerings. After a long period of HMO dominance in the industry, different types of plans emerged to provide a wider scope of options for the consumer. Health maintenance organizations (HMOs) still remain one of the most effective ways to receive care and save money, and most often, group plans use this model. HMO plans tend to offer more services for a flat dollar amount upfront than other models,
Preferred provider organization (PPO) plans are also popular across the private market, as they allowed for members to visit both in- and out-of-network providers, while HMO policyholders are required to stay in network if they want their insurer to help pay for a service. Point of Service (POS) plans are a midpoint between HMO and PPO, offering coverage on non-network care in addition to connecting members with the perks of an HMO network, including copays for various services and selecting a primary care provider to coordinate your care.
Another common form of coverage is a consumer-driven plan, such as a Health Savings Account (HSA), also known as a qualified high-deductible health plan (HDHP) as the IRS has approved these plans for tax benefits. While these plans may not be as practical as others, requiring use of a savings account, they connect you to a network of providers and once you reach the deductible, most insurers cover all of your services in full.
For clarification of health insurance terms, see our Glossary.
Public Health Insurance in the U.S.
The United States government offers several types of health insurance plans for the low-income, elderly, disabled, military, and veteran populations. Medicare is offered to American citizens over the age of 65, which is administered by private insurers as well as the federal government, as the program insures 49.4 million people. The nation’s largest medical assistance program, Medicaid, is another major source of coverage, offered to families, children, and individuals with limited resources and/or disabilities. As of 2012, 20 percent of the U.S. population, 62.7 million individuals, are insured by Medicaid. Other programs such as TRICARE and Veterans’ Assistance (VA) are offered to those who currently serve in the military and their families, or those who have previously.
State Health Insurance Exchanges
A new source of individual coverage will be available in October 2013, opening in each of the fifty states as an online marketplace for insurance. Operated by state and federal governments, these plans will be offered in varying levels of coverage with a set of essential health benefits (EHBs) included for every member. This means, each of these new plans will provide all members with the same access to services from ten different categories, including preventive and wellness and disease management, maternity and newborn care, hospitalization, emergency services, mental health and substance abuse services, and prescription drugs, among others.
In addition to offering a large selection of services, these plans are approved for use with tax credits, or subsidies, that the government offers to individuals and families who earn up to 400 percent of the current federal poverty level. Essentially, this tax credit will be figured based on a person’s income and applied towards their share of costs for coverage, providing a premium discount. In some states, private health plans are assisting with the exchanges in order to ensure quality and organization, and offer their knowledge to the new plans.
1. Kaiser State Health Facts. Total Medicare Beneficiaries.
2. Kaiser State Health Facts. Medicaid & CHIP.