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Health insurance in the United States

Health insurance in the United States

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Encyclopedia
The term health insurance is commonly used in the United States to describe any program that helps pay for medical expenses, whether through privately purchased insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...

, social insurance
Social insurance
Social insurance is any government-sponsored program with the following four characteristics:* the benefits, eligibility requirements and other aspects of the program are defined by statute;...

 or a non-insurance social welfare program funded by the government. Synonyms for this usage include "health coverage," "health care coverage" and "health benefits."

In a more technical sense, the term is used to describe any form of insurance that provides protection against the costs of medical services. This usage includes private insurance and social insurance programs such as Medicare
Medicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...

, but excludes social welfare programs such as Medicaid
Medicaid
Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states. People served by Medicaid are U.S. citizens or legal permanent...

. In addition to medical expense insurance, it also includes insurance covering disability
Disability insurance
Disability Insurance, often called DI or disability income insurance, is a form of insurance that insures the beneficiary's earned income against the risk that a disability will make working uncomfortable , painful , or impossible...

 or long-term nursing or custodial care
Long term care insurance
Long-term care insurance , an insurance product sold in the United States, United Kingdom and Canada, helps provide for the cost of long-term care beyond a predetermined period...

 needs.

The US health care system relies heavily on private and not-for-profit health insurance, which is the primary source of coverage for most Americans. According to the United States Census Bureau
United States Census Bureau
The United States Census Bureau is the government agency that is responsible for the United States Census. It also gathers other national demographic and economic data...

, approximately 85% of Americans have health insurance; nearly 60% obtain it through an employer, while about 9% purchase it directly. Various government agencies provide coverage to about 28% of Americans (there is some overlap in these figures).

In 2007, there were nearly 46 million people in the US (over 15% of the population) who were without health insurance for at least part of that year. Over 1 million workers lost their health care coverage in January, February and March 2009. Approximately, 268,400 more workers lost health care coverage in March 2009 than in March 2008. Proving that today, that number is markedly higher as many workers who have lost their jobs have also lost their employer-provided health insurance. The percentage of the non-elderly population who are uninsured has been generally increasing since the year 2000. There is considerable debate in the US on the causes of and possible remedies
Health care reform in the United States
Health care reform in the United States has a long history, of which the most recent results were two federal statutes enacted in 2010: the Patient Protection and Affordable Care Act , signed March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 , which amended the PPACA and...

 for this level of uninsurance as well as the impact it has on the overall US health care system.

History



Accident insurance was first offered in the United States by the Franklin Health Assurance Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries arising from railroad and steamboat accidents. Sixty organizations were offering accident insurance in the US by 1866, but the industry consolidated rapidly soon thereafter. While there were earlier experiments, the origins of sickness coverage in the US effectively date from 1890. The first employer-sponsored group disability
Disability
A disability may be physical, cognitive, mental, sensory, emotional, developmental or some combination of these.Many people would rather be referred to as a person with a disability instead of handicapped...

 policy was issued in 1911, but this plan's primary purpose was replacing wages lost due to an inability to work, not medical expenses.

Before the development of medical expense insurance, patients were expected to pay all other health care costs out of their own pockets, under what is known as the fee-for-service
Fee-for-service
Fee-for-service is a payment model where services are unbundled and paid for separately. In health care, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care...

 business model. During the middle to late 20th century, traditional disability insurance evolved into modern health insurance programs. Today, most comprehensive private health insurance programs cover the cost of routine, preventive, and emergency health care procedures, and also most prescription drugs, but this was not always the case.

Hospital and medical expense policies were introduced during the first half of the 20th century. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross
Blue Cross and Blue Shield Association
The Blue Cross Blue Shield Association is a federation of 39 separate health insurance organizations and companies in the United States. Combined, they directly or indirectly provide health insurance to over 100 million Americans. The history of Blue Cross dates back to 1929, while the history of...

 organizations in the 1930s. The first employer-sponsored hospitalization plan was created by teachers in Dallas, Texas
Dallas, Texas
Dallas is the third-largest city in Texas and the ninth-largest in the United States. The Dallas-Fort Worth Metroplex is the largest metropolitan area in the South and fourth-largest metropolitan area in the United States...

 in 1929. Because the plan only covered members' expenses at a single hospital, it is also the forerunner of today's health maintenance organization
Health maintenance organization
A health maintenance organization is an organization that provides managed care for health insurance contracts in the United States as a liaison with health care providers...

s (HMOs).

Employer-sponsored health insurance plans dramatically expanded as a result of wage controls during World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

. The labor market was tight because of the increased demand for goods and decreased supply of workers during the war. Federally imposed wage and price controls prohibited manufacturers and other employers raising wages high enough to attract sufficient workers. When the War Labor Board declared that fringe benefits, such as sick leave and health insurance, did not count as wages for the purpose of wage controls, employers responded with significantly increased benefits. Between 1940 and 1950, the total number of people enrolled in health insurance plans grew from 20,662,000 to 142,334,000, and by 1958, 75% of Americans had some form of health coverage.

Employer-sponsored health insurance was considered taxable income until 1954.

In 1965, President Lyndon B. Johnson
Lyndon B. Johnson
Lyndon Baines Johnson , often referred to as LBJ, was the 36th President of the United States after his service as the 37th Vice President of the United States...

 signed the Medicare
Medicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...

 and Medicaid
Medicaid
Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states. People served by Medicaid are U.S. citizens or legal permanent...

 legislation into law. Since their inception, the greatest challenge to the programs has been “spiraling healthcare costs, stemming largely from innovations in medical technology and pharmaceuticals." Now, as baby boomers advance toward senior citizenry, concerns about the financial sustainability of the programs frame any discussion about Medicare and Medicaid.

The debate for a public health care system in the United States has gone on for about 70 years. President Harry S. Truman
Harry S. Truman
Harry S. Truman was the 33rd President of the United States . As President Franklin D. Roosevelt's third vice president and the 34th Vice President of the United States , he succeeded to the presidency on April 12, 1945, when President Roosevelt died less than three months after beginning his...

 was the first United States president to propose a system of public health insurance in his November 19, 1945 address. This fund would be open to all Americans, but it would remain optional. Participants would pay monthly fees into the plan, which would cover the cost of any and all medical expenses that arose in a time of need. The government would pay for the cost of services rendered by any doctor who chose to join the program. In addition, the insurance plan would give a cash balance to the policy holder to replace wages lost due to illness or injury. This program was denounced as a socialist approach to medicine by the American Medical Association
American Medical Association
The American Medical Association , founded in 1847 and incorporated in 1897, is the largest association of medical doctors and medical students in the United States.-Scope and operations:...

 (AMA) and did not pass.

Public health care coverage


Public programs provide the primary source of coverage for most seniors and for low-income children and families who meet certain eligibility requirements. The primary public programs are Medicare, a federal social insurance program for seniors (generally persons aged 65 and over) and certain disabled individuals; Medicaid, funded jointly by the federal government and states but administered at the state level, which covers certain very low income children and their families; and SCHIP, also a federal-state partnership that serves certain children and families who do not qualify for Medicaid but who cannot afford private coverage. Other public programs include military health benefits provided through TRICARE
TRICARE
TRICARE, formerly known as the Civilian Health and Medical Program of the Uniformed Services , is a health care program of the United States Department of Defense Military Health System. TRICARE provides civilian health benefits for military personnel, military retirees, and their dependents,...

 and the Veterans Health Administration
Veterans Health Administration
The Veterans Health Administration is the component of the United States Department of Veterans Affairs led by the Under Secretary of Veterans Affairs for Health that implements the medical assistance program of the VA through the administration and operation of numerous VA outpatient clinics,...

 and benefits provided through the Indian Health Service
Indian Health Service
Indian Health Service is an Operating Division within the U.S. Department of Health and Human Services . IHS is responsible for providing medical and public health services to members of federally recognized Tribes and Alaska Natives...

. Some states have additional programs for low-income individuals.

Health care costs have risen more rapidly than the general economic growth and continue to do so, with the consequence that Medicare and Medicaid constitute an increasing economic burden in federal spending.

Medicare



In the United States, Medicare is a federal social insurance program that provides health insurance to elderly workers and their dependents, individuals who become totally and permanently disabled, and end stage renal disease (ESRD) patients. Some health care economists (Uwe Reinhardt
Uwe Reinhardt
Uwe E. Reinhardt is a professor of political economy at Princeton University and holds several positions in the healthcare industry. Reinhardt is a prominent scholar in health care economics and a frequent speaker and author on subjects ranging from the war in Iraq to the future of Medicare.-...

 of Princeton
Princeton University
Princeton University is a private research university located in Princeton, New Jersey, United States. The school is one of the eight universities of the Ivy League, and is one of the nine Colonial Colleges founded before the American Revolution....

 and Stuart Butler among others) assert that the third-party payment feature of this program has had the unintended consequence
Unintended consequence
In the social sciences, unintended consequences are outcomes that are not the outcomes intended by a purposeful action. The concept has long existed but was named and popularised in the 20th century by American sociologist Robert K. Merton...

 of distorting the price of medical procedures. As a result, the Health Care Financing Administration has set up a list of procedures and corresponding prices under the Resource-Based Relative Value Scale
Resource-Based Relative Value Scale
Resource-based relative value scale is a schema used to determine how much money medical providers should be paid. It is partially used by Medicare in the United States and by nearly all Health maintenance organizations ....

. Recent research has found that the health trends of previously uninsured adults, especially those with chronic health problems, improves once they enter the Medicare program.

Medicare Advantage



Medicare Advantage plans expand the health care options for Medicare beneficiaries. The option for Medicare Advantage plans is a result of the Balanced Budget Act of 1997
Balanced Budget Act of 1997
The Balanced Budget Act of 1997, , was signed into law on August 5, 1997. It was an omnibus legislative package enacted using the budget reconciliation process and designed to balance the federal budget by 2002....

, with the intent to better control the rapid growth in Medicare spending, as well as to provide Medicare beneficiaries more choices.

Medicare Part D (Prescription Drugs)



Medicare Part D
Medicare Part D
Medicare Part D is a federal program to subsidize the costs of prescription drugs for Medicare beneficiaries in the United States. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and went into effect on January 1, 2006.- Eligibility and...

 provides a private insurance option to allow Medicare beneficiaries to purchase subsidized coverage for the costs of prescription drug
Prescription drug
A prescription medication is a licensed medicine that is regulated by legislation to require a medical prescription before it can be obtained. The term is used to distinguish it from over-the-counter drugs which can be obtained without a prescription...

s. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act
Medicare Prescription Drug, Improvement, and Modernization Act
The Medicare Prescription Drug, Improvement, and Modernization Act is a federal law of the United States, enacted in 2003. It produced the largest overhaul of Medicare in the public health program's 38-year history.The MMA was signed by President George W...

 of 2003 (MMA) and went into effect on January 1, 2006.

Medicaid



Medicaid was instituted for the very poor in 1965. Despite its establishment, the percentage of US residents who lack any form of health insurance has increased since 1994. It has been reported that the number of physicians accepting Medicaid has decreased in recent years due to lower reimbursement rates. Medicaid is a social welfare or social protection program rather than a social insurance program.

State Children's Health Insurance Program (SCHIP)


The State Children’s Health Insurance Program (SCHIP) is a joint state/federal program to provide health insurance to children in families who earn too much money to qualify for Medicaid, yet cannot afford to buy private insurance. The statutory authority for SCHIP is under title XXI of the Social Security Act. SCHIP programs are run by the individual states according to requirements set by the federal Centers for Medicare and Medicaid Services
Centers for Medicare and Medicaid Services
The Centers for Medicare & Medicaid Services , previously known as the Health Care Financing Administration , is a federal agency within the United States Department of Health and Human Services that administers the Medicare program and works in partnership with state governments to administer...

, and may be structured as independent programs separate from Medicaid (separate child health programs), as expansions of their Medicaid programs (SCHIP Medicaid expansion programs), or combine these approaches (SCHIP combination programs). States receive enhanced federal funds for their SCHIP programs at a rate above the regular Medicaid match.

Military health benefits



Health benefits are provided to active duty
Active duty
Active duty refers to a full-time occupation as part of a military force, as opposed to reserve duty.-Pakistan:The Pakistan Armed Forces are one of the largest active service forces in the world with almost 610,000 full time personnel due to the complex and volatile nature of Pakistan's...

 service members
United States armed forces
The United States Armed Forces are the military forces of the United States. They consist of the Army, Navy, Marine Corps, Air Force, and Coast Guard.The United States has a strong tradition of civilian control of the military...

, retired
Retirement
Retirement is the point where a person stops employment completely. A person may also semi-retire by reducing work hours.Many people choose to retire when they are eligible for private or public pension benefits, although some are forced to retire when physical conditions don't allow the person to...

 service members and their dependents by the Department of Defense
United States Department of Defense
The United States Department of Defense is the U.S...

 Military Health System
Military Health System
The Military Health System is the enterprise within the United States Department of Defense responsible for providing health care to active duty and retired U.S. Military personnel and their dependents...

 (MHS). The MHS consists of a direct care network of Military Treatment Facilities and a purchased care network known as TRICARE
TRICARE
TRICARE, formerly known as the Civilian Health and Medical Program of the Uniformed Services , is a health care program of the United States Department of Defense Military Health System. TRICARE provides civilian health benefits for military personnel, military retirees, and their dependents,...

. Additionally, veteran
Veteran
A veteran is a person who has had long service or experience in a particular occupation or field; " A veteran of ..."...

s may also be eligible for benefits through the Veterans Health Administration
Veterans Health Administration
The Veterans Health Administration is the component of the United States Department of Veterans Affairs led by the Under Secretary of Veterans Affairs for Health that implements the medical assistance program of the VA through the administration and operation of numerous VA outpatient clinics,...

.

Indian health service


The Indian Health Service
Indian Health Service
Indian Health Service is an Operating Division within the U.S. Department of Health and Human Services . IHS is responsible for providing medical and public health services to members of federally recognized Tribes and Alaska Natives...

 (IHS) provides medical assistance to eligible American Indians at IHS facilities, and helps pay the cost of some services provided by non-IHS health care providers.

State risk pools


In 1976, some states began providing guaranteed-issuance risk pools, which enable individuals who are medically uninsurable through private health insurance to purchase a state-sponsored health insurance plan, usually at higher cost. Minnesota was the first to offer such a plan; 34 states (Alabama, Alaska, Arkansas, California, Colorado, Connecticut, Florida, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia, Wisconsin, Wyoming) now offer them. Plans vary greatly from state to state, both in their costs and benefits to consumers and in their methods of funding and operations. They serve a very small portion of the uninsurable market—about 182,000 people in the U.S. as of 2004, and about 200,000 in 2008.

These risk pools allow people with pre-existing conditions such as cancer, diabetes, heart disease or other chronic illnesses to be able to switch jobs or seek self-employment without fear of being without health care benefits. However, the plans are expensive, with premiums that can be double the average policy, and the pools currently cover only 1 in 25 of the so-called "uninsurable" population. Additionally, even plans which are not expensive can leave those enrolled with little real health insurance beyond "catastrophic" insurance; for example, one insurance plan through Minnesota's high-risk pool, while costing only $215 per quarter, includes a $10,000 deductible with no preventative or other health care covered unless and until the enrollee has spent $10,000 of their own money during the year on health care. Very sick people can accumulate large medical bills during mandatory waiting periods before their medical expenses are covered, and there are often lifetime expenditure caps (maximums), after which the risk pool no longer pays for any medical expenses.

Efforts to pass a national pool have been unsuccessful, but some federal tax money has been awarded to states to innovate and improve their plans. With the Patient Protection and Affordable Care Act
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The law is the principal health care reform legislation of the 111th United States Congress...

, effective by 2014, it will be easier for people with pre-existing conditions to afford regular insurance, since all insurers will be fully prohibited from discriminating against or charging higher rates for any individuals based on pre-existing medical conditions.

Pre-Existing Condition Insurance Plan



Pre-Existing Condition Insurance Plan, or PCIP, is a transitional program created in the Patient Protection and Affordable Care Act
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The law is the principal health care reform legislation of the 111th United States Congress...

 (PPACA). Those eligible for PCIP are citizens of the United States or those legally residing in the U.S., who have been uninsured for the last 6 months and "have a pre-existing condition or have been denied health coverage because of their health condition." However, if one has health insurance or is enrolled in a state high risk pool, they are not eligible for PCIP, even if that coverage does not cover their medical condition. PCIP is run by the individual states or through the U.S. Department of Health and Human Services, which has a contract with the Government Employees Health Association, or GEHA
GEHA
GEHA is a self-insured, not-for-profit association providing health and dental plans to federal employees and retirees and their families through the Federal Employees Health Benefits Plan and the Federal Employees Dental and Vision Insurance Program .The company currently offers traditional...

, to administer benefits. Both will be funded by the federal government and provide three plan options. These options are the standard, extended, and the Health Savings Account
Health savings account
A health savings account is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a high-deductible health plan . The funds contributed to an account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account...

 option. PCIP only covers the individual enrollee and does not include family members or dependents. In 2014, the Affordable Care Act provision banning discrimination based on pre-existing conditions will be implemented and PCIP enrollees will be transition into new state-based health care exchanges.

Private health care coverage


Private health insurance may be purchased on a group basis (e.g., by a firm to cover its employees) or purchased by individual consumers. Most Americans with private health insurance receive it through an employer-sponsored program. According to the United States Census Bureau
United States Census Bureau
The United States Census Bureau is the government agency that is responsible for the United States Census. It also gathers other national demographic and economic data...

, some 60% of Americans are covered through an employer, while about 9% purchase health insurance directly.

The US has a joint federal/state system for regulating insurance, with the federal government ceding primary responsibility to the states under the McCarran-Ferguson Act
McCarran-Ferguson Act
The McCarran–Ferguson Act, 15 U.S.C. §§ 1011-1015, is a United States federal law that exempts the business of insurance from most federal regulation, including federal anti-trust laws to a limited extent. The McCarran–Ferguson Act was passed by Congress in 1945 after the Supreme Court ruled in...

. States regulate the content of health insurance policies and often require coverage of specific types of medical services or health care providers. State mandates generally do not apply to the health plans offered by large employers, due to the preemption clause of the Employee Retirement Income Security Act
Employee Retirement Income Security Act
The Employee Retirement Income Security Act of 1974 is an American federal statute that establishes minimum standards for pension plans in private industry and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans...

.

Employer-sponsored


Employer-sponsored health insurance is paid for by businesses on behalf of their employees as part of an employee benefit
Employee benefit
Employee benefits and benefits in kind are various non-wage compensations provided to employees in addition to their normal wages or salaries...

 package. Most private (non-government) health coverage in the US is employment-based. Nearly all large employers in America offer group health insurance to their employees. The typical large-employer PPO plan is typically more generous than either Medicare
Medicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...

 or the Federal Employees Health Benefits Program Standard Option.

The employer typically makes a substantial contribution towards the cost of coverage. Typically, employers pay about 85% of the insurance premium for their employees, and about 75% of the premium for their employees' dependents. The employee pays the remaining fraction of the premium, usually with pre-tax/tax-exempt earnings. These percentages have been stable since 1999. Health benefits provided by employers are also tax-favored: Employee contributions can be made on a pre-tax basis if the employer offers the benefits through a section 125 cafeteria plan
Cafeteria plan
A cafeteria plan is a type of employee benefit plan offered in the United States pursuant to Section 125 of the Internal Revenue Code. Its name comes from the earliest such plans that allowed employees to choose between different types of benefits, similar to the ability of a customer to choose...

.

Although workers are effectively paid less than they would be, because of the cost of insurance premiums to the employer, employer-sponsored health insurance offers several benefits to workers, including economies of scale
Economies of scale
Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...

, a reduction in adverse selection
Adverse selection
Adverse selection, anti-selection, or negative selection is a term used in economics, insurance, statistics, and risk management. It refers to a market process in which "bad" results occur when buyers and sellers have asymmetric information : the "bad" products or services are more likely to be...

 pressures on the insurance pool (premiums are lower when all employees participate rather than just the sickest), and reduced income taxes. The disadvantages include disruptions related to changing jobs, the regressive tax
Regressive tax
A regressive tax is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases. "Regressive" describes a distribution effect on income or expenditure, referring to the way the rate progresses from high to low, where the average tax rate exceeds the...

 effect (high-income workers benefit far more from the tax exemption for premiums than low-income workers), and increased spending on healthcare.

Costs for employer-paid health insurance are rising rapidly: since 2001, premiums for family coverage have increased 78%, while wages have risen 19% and inflation has risen 17%, according to a 2007 study by the Kaiser Family Foundation
Kaiser Family Foundation
The Henry J. Kaiser Family Foundation , or just Kaiser Family Foundation, is a U.S.-based non-profit, private operating foundation headquartered in Menlo Park, California. It focuses on the major health care issues facing the nation, as well as the U.S. role in global health policy...

. Employer costs have risen noticeably per hour worked, and vary significantly. In particular, average employer costs for health benefits vary by firm size and occupation. The cost per hour of health benefits is generally higher for workers in higher-wage occupations, but represent a smaller percentage of payroll. The percentage of total compensation devoted to health benefits has been rising since the 1960s. Average premiums, including both the employer and employee portions, were $4,704 for single coverage and $12,680 for family coverage in 2008.

However, in a 2007 analysis, the Employee Benefit Research Institute concluded that the availability of employment-based health benefits for active workers in the US is stable. The "take-up rate," or percentage of eligible workers participating in employer-sponsored plans, has fallen somewhat, but not sharply. EBRI interviewed employers for the study, and found that others might follow if a major employer discontinued health benefits. Effective by January 1, 2014, the Patient Protection and Affordable Care Act
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The law is the principal health care reform legislation of the 111th United States Congress...

 will impose a $2000 per employee tax penalty on employers with over 50 employees who do not offer health insurance to their full-time workers. (In 2008, over 95% of employers with at least 50 employees offered health insurance.) On the other hand, public policy changes could also result in a reduction in employer support for employment-based health benefits.

Although much more likely to offer retiree health benefits than small firms, the percentage of large firms offering these benefits fell from 66% in 1988 to 34% in 2002.

Small employer group coverage


According to a 2007 study, about 59% of employers at small firms (3-199 workers) in the US provide employee health insurance. The percentage of small firms offering coverage has been dropping steadily since 1999. The study notes that cost remains the main reason cited by small firms who do not offer health benefits. Small firms that are new are less likely to offer coverage than ones that have been in existence for a number of years. For example, using 2005 data for firms with fewer than 10 employees, 43% of those that had been in existence at least 20 years offered coverage, but only 24% of those that had been in existence less than 5 years did. The volatility of offer rates from year to year also appears to be higher for newer small businesses.

The types of coverage available to small employers are similar to those offered by large firms, but small businesses do not have the same options for financing their benefit plans. In particular, self-funded health care
Self-funded health care
Self-funded health care is a self insurance arrangement whereby an employer provides health or disability benefits to employees with its own funds. This is different from fully insured plans where the employer contracts an insurance company to cover the employees and dependents. In self-funded...

 (whereby an employer provides health or disability benefits to employees with its own funds rather than contracting an insurance company) is not a practical option for most small employers. A RAND
RAND
RAND Corporation is a nonprofit global policy think tank first formed to offer research and analysis to the United States armed forces by Douglas Aircraft Company. It is currently financed by the U.S. government and private endowment, corporations including the healthcare industry, universities...

 Corporation study published in April 2008 found that the cost of health care coverage places a greater burden on small firms, as a percentage of payroll, than on larger firms. A study published by the American Enterprise Institute
American Enterprise Institute
The American Enterprise Institute for Public Policy Research is a conservative think tank founded in 1943. Its stated mission is "to defend the principles and improve the institutions of American freedom and democratic capitalism—limited government, private enterprise, individual liberty and...

 in August 2008 examined the effect of state benefit mandates on self-employed individuals, and found that "the larger the number of mandates in a state, the lower the probability that a self-employed person will be a significant employment generator." Beneficiary cost sharing is, on average, higher among small firms than large firms.

When small group plans are medically underwritten, employees are asked to provide health information about themselves and their covered family members when they apply for coverage. When determining rates, insurance companies use the medical information on these applications. Sometimes they will request additional information from an applicant's physician or ask the applicants for clarification. http://www.nahu.org/consumer/groupinsurance.cfm

States regulate small group premium rates, typically by placing limits on the premium variation allowable between groups (rate bands). Insurers price to recover their costs over their entire book of small group business while abiding by state rating rules. Over time, the effect of initial underwriting "wears off" as the cost of a group regresses towards the mean
Regression toward the mean
In statistics, regression toward the mean is the phenomenon that if a variable is extreme on its first measurement, it will tend to be closer to the average on a second measurement, and—a fact that may superficially seem paradoxical—if it is extreme on a second measurement, will tend...

. Recent claim experience - whether better or worse than average - is a strong predictor of future costs in the near term. But the average health status of a particular small employer group tends to regress over time towards that of an average group. The process used to price small group coverage changes when a state enacts small group reform laws.

Insurance broker
Insurance broker
An insurance broker finds sources for contracts of insurance on behalf of their customers. The three largest insurance brokers in the world, by revenue, are Aon, Marsh & McLennan, and Willis Group Holdings.-Purpose of insurance brokers:...

s play a significant role in helping small employers find health insurance, particularly in more competitive markets. Average small group commissions range from 2 percent to 8 percent of premiums. Brokers provide services beyond insurance sales, such as assisting with employee enrollment and helping to resolve benefits issues.

College-sponsored health insurance for students


Many colleges, universities, graduate schools, professional schools and trade schools offer a school-sponsored health insurance plan. Many schools require that you enroll in the school-sponsored plan unless you are able to show that you have comparable coverage from another source.

Effective group health plan years beginning after September 23, 2010, if an employer-sponsored health plan allows employees' children to enroll in coverage, then the health plan must allow employees' adult children to enroll as well as long as the adult child is not yet age 26. Some group health insurance plans may also require that the adult child not be eligible for other group health insurance coverage, but only before 2014.

This extension of coverage will help cover one in three young adults, according to White House documents.

Federal employees health benefit plan (FEHBP)


In addition to such public plans as Medicare and Medicaid, the federal government also sponsors a health benefit plan for federal employees—the Federal Employees Health Benefits Program (FEHBP). FEHBP provides health benefits to full-time civilian employees. Active-duty service members, retired service members and their dependents are covered through the Department of Defense Military Health System (MHS). FEHBP is managed by the federal Office of Personnel Management
Office of Personnel Management
The United States Office of Personnel Management is an independent agency of the United States government that manages the civil service of the federal government. The current Director is John Berry.-History:...

.

"Portability" of group coverage


Two federal laws address the ability of individuals with employment-based health insurance coverage to maintain coverage.

The Consolidated Omnibus Budget Reconciliation Act of 1985
Consolidated Omnibus Budget Reconciliation Act of 1985
The Consolidated Omnibus Budget Reconciliation Act of 1985 is a law passed by the U.S. Congress on a reconciliation basis and signed by President Reagan that, among other things, mandates an insurance program giving some employees the ability to continue health insurance coverage after leaving...

 (COBRA) enables certain individuals with employer-sponsored coverage to extend their coverage if certain "qualifying event
Qualifying event
A qualifying event is an event that results in the loss of employer sponsored benefits due to which a qualified beneficiary is eligible for COBRA benefits....

s" would otherwise cause them to lose it. Employers may require COBRA-qualified individuals to pay the full cost of coverage, and coverage cannot be extended indefinitely. COBRA only applies to firms with 20 or more employees, although some states also have "mini-COBRA" laws that apply to small employers.

The Health Insurance Portability and Accountability Act
Health Insurance Portability and Accountability Act
The Health Insurance Portability and Accountability Act of 1996 was enacted by the U.S. Congress and signed by President Bill Clinton in 1996. It was originally sponsored by Sen. Edward Kennedy and Sen. Nancy Kassebaum . Title I of HIPAA protects health insurance coverage for workers and their...

 of 1996 (HIPAA) provides for forms of both "group-to-group" and "group-to-individual" portability. When an individual moves from one employer's benefit plan to another's, the new plan must count coverage under the old plan against any waiting period for pre-existing conditions, as long as there is not a break in coverage of more than 63 days between the two plans. When certain qualified individuals lose group coverage altogether, they must be guaranteed access to some form of individual coverage. To qualify, they must have at least 18 months of prior continuous coverage. The details of access and the price of coverage are determined on a state-by-state basis.

Association group health insurance


Regular health insurance is sometimes available to members of associations. Associations such as the American Bar Association
American Bar Association
The American Bar Association , founded August 21, 1878, is a voluntary bar association of lawyers and law students, which is not specific to any jurisdiction in the United States. The ABA's most important stated activities are the setting of academic standards for law schools, and the formulation...

 and IEEE offer health insurance to their members, using an established insurance company to write the policies for a group plan.

Individually purchased



According to the US Census Bureau, about 9% of Americans are covered under health insurance purchased directly. The range of products available is similar to those provided through employers. However, average out-of-pocket spending is higher in the individual market, with higher deductibles, co-payments and other cost-sharing provisions. Major medical is the most commonly purchased form of individual health insurance.

In the individual market, the consumer pays the entire premium without benefit of an employer contribution. While self-employed individuals receive a tax deduction for their health insurance and can buy health insurance with additional tax benefits, most consumers in the individual market do not receive any tax benefit.

Premiums vary significantly by age. In states that allow individual medical plan underwriting, premiums also vary by health status. However, with the Patient Protection and Affordable Care Act
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The law is the principal health care reform legislation of the 111th United States Congress...

, effective by 2014, all insurers will be fully prohibited from discriminating against or charging higher rates for any individuals based on pre-existing medical conditions.

In August 2008, the Hartford Courant
The Hartford Courant
The Hartford Courant is the largest daily newspaper in the U.S. state of Connecticut, and is a morning newspaper for most of the state north of New Haven and east of Waterbury...

 reported that competition was increasing in the individual health insurance market, with more insurers entering the market, an increased variety of products, and a broader spread of prices.

Individual health insurance is primarily regulated at the state level, consistent with the McCarran-Ferguson Act
McCarran-Ferguson Act
The McCarran–Ferguson Act, 15 U.S.C. §§ 1011-1015, is a United States federal law that exempts the business of insurance from most federal regulation, including federal anti-trust laws to a limited extent. The McCarran–Ferguson Act was passed by Congress in 1945 after the Supreme Court ruled in...

. Model acts and regulations promulgated by the National Association of Insurance Commissioners
National Association of Insurance Commissioners
The National Association of Insurance Commissioners is an Internal Revenue Code Section 501 non-profit organization which seeks to organize the regulatory and supervisory efforts of the various state insurance commissioners from around the United States. The NAIC was formed in 1871. Its current...

 (NAIC) provide some degree of uniformity state to state. These models do not have the force of law and have no effect unless they are adopted by a state. They are, however, used as guides by most states, and some states adopt them with little or no change.

Traditional indemnity or fee-for-service


Early hospital and medical plans offered by insurance companies paid either a fixed amount for specific diseases or medical procedures (schedule benefits) or a percentage of the provider's fee. The relationship between the patient and the medical provider was not changed. The patient received medical care and was responsible for paying the provider. If the service was covered by the policy, the insurance company was responsible for reimbursing or indemnifying
Indemnity
An indemnity is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnitor may or may not be responsible for the loss suffered by the indemnitee...

 the patient based on the provisions of the insurance contract ("reimbursement benefits"). Health insurance plans that are not based on a network of contracted providers, or that base payments on a percentage of provider charges, are still described as indemnity
Indemnity
An indemnity is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnitor may or may not be responsible for the loss suffered by the indemnitee...

 or fee-for-service
Fee-for-service
Fee-for-service is a payment model where services are unbundled and paid for separately. In health care, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care...

 plans.

Blue Cross & Blue Shield plans



The Blue Cross and Blue Shield Association (BCBSA) is a federation of 39 separate health insurance organizations and companies in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

. Combined, they directly or indirectly provide health insurance to over 100 million Americans. BCBSA insurance companies are franchisees, independent of the association (and traditionally each other), offering insurance plans within defined regions under one or both of the association's brands. Blue Cross Blue Shield insurers offer some form of health insurance coverage in every U.S. state
U.S. state
A U.S. state is any one of the 50 federated states of the United States of America that share sovereignty with the federal government. Because of this shared sovereignty, an American is a citizen both of the federal entity and of his or her state of domicile. Four states use the official title of...

. They also act as administrators of Medicare
Medicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...

 in many states or regions of the U.S., and provide coverage to state government employees as well as to the federal government employees under a nationwide option of the Federal Employees Health Benefit Plan
Federal Employees Health Benefit Plan
The Federal Employees Health Benefits Program is a system of "managed competition" through which employee health benefits are provided to civilian government employees and annuitants of the United States government...

.

Health Maintenance Organizations



A health maintenance organization (HMO) is a type of managed care organization
Managed care
...intended to reduce unnecessary health care costs through a variety of mechanisms, including: economic incentives for physicians and patients to select less costly forms of care; programs for reviewing the medical necessity of specific services; increased beneficiary cost sharing; controls on...

 (MCO) that provides a form of health care coverage that is fulfilled through hospitals, doctors, and other providers with which the HMO has a contract. The Health Maintenance Organization Act of 1973
Health Maintenance Organization Act of 1973
The Health Maintenance Organization Act of 1973 , also known as the HMO Act of 1973, 42 U.S.C. § 300e, is a law passed by the Congress of the United States that resulted from discussions Paul Ellwood had with what is today the Department of Health and Human Services...

 required employers with 25 or more employees to offer federally certified HMO options. Unlike traditional indemnity
Indemnity
An indemnity is a sum paid by A to B by way of compensation for a particular loss suffered by B. The indemnitor may or may not be responsible for the loss suffered by the indemnitee...

 insurance, an HMO covers only care rendered by those doctors and other professionals who have agreed to treat patients in accordance with the HMO's guidelines and restrictions in exchange for a steady stream of customers. Benefits are provided through a network of providers. Providers may be employees of the HMO ("staff model"), employees of a provider group that has contracted with the HMO ("group model"), or members of an independent practice association
Independent practice association
An independent practice association is an association of independent physicians, or other organization that contracts with independent physicians, and provides services to managed care organizations on a negotiated per capita rate, flat retainer fee, or negotiated fee-for-service basis...

 ("IPA model"). HMOs may also use a combination of these approaches ("network model").

Managed care



The term managed care is used to describe a variety of techniques intended to reduce the cost of health benefits and improve the quality of care. It is also used to describe organizations that use these techniques ("managed care organization"). Many of these techniques were pioneered by HMOs, but they are now used in a wide variety of private health insurance programs. Through the 1990s, managed care grew from about 25% US employees with employer-sponsored coverage to the vast majority.
Rise of managed care in the US
Year Conventional plans HMOs
Health maintenance organization
A health maintenance organization is an organization that provides managed care for health insurance contracts in the United States as a liaison with health care providers...

PPOs
Preferred provider organization
In health insurance in the United States, a preferred provider organization is a managed care organization of medical doctors, hospitals, and other health care providers who have covenanted with an insurer or a third-party administrator to provide health care at reduced...

POS plans HDHP/SOs
1998 14% 27% 35% 24% ~
1999 10% 28% 39% 24% ~
2000 8% 29% 42% 21% ~
2001 7% 24% 46% 23% ~
2002 4% 27% 52% 18% ~
2003 5% 24% 54% 17% ~
2004 5% 25% 55% 15% ~
2005 3% 21% 61% 15% ~
2006 3% 20% 60% 13% 4%
2007 3% 21% 57% 15% 5%
2008 2% 20% 58% 12% 8%

Network-based managed care

Many managed care programs are based on a panel or network of contracted health care providers. Such programs typically include:
  • A set of selected providers that furnish a comprehensive array of health care services to enrollees;
  • Explicit standards for selecting providers;
  • Formal utilization review and quality improvement programs;
  • An emphasis on preventive care; and
  • Financial incentives to encourage enrollees to use care efficiently.


Provider networks can be used to reduce costs by negotiating favorable fees from providers, selecting cost effective providers, and creating financial incentives for providers to practice more efficiently. A survey issued in 2009 by America's Health Insurance Plans found that patients going to out-of-network providers are sometimes charged extremely high fees.

Network-based plans may be either closed or open. With a closed network, enrollees' expenses are generally only covered when they go to network providers. Only limited services are covered outside the network—typically only emergency and out-of-area care. Most traditional HMOs were closed network plans. Open network plans provide some coverage when an enrollee uses non-network provider, generally at a lower benefit level to encourage the use of network providers. Most preferred provider organization
Preferred provider organization
In health insurance in the United States, a preferred provider organization is a managed care organization of medical doctors, hospitals, and other health care providers who have covenanted with an insurer or a third-party administrator to provide health care at reduced...

 plans are open-network (those that are not are often described as exclusive provider organizations, or EPOs), as are point of service
Point of service plan
A point of service plan, or POS plan, is a type of managed care health insurance system. It combines characteristics of both the HMO and the PPO. Members of a POS plan do not make a choice about which system to use until the point at which the service is being used.The POS is based on the basic...

 (POS) plans.

The terms "open panel" and "closed panel" are sometimes used to describe which health care providers in a community have the opportunity to participate in a plan. In a "closed panel" HMO, the network providers are either HMO employees (staff model) or members of large group practices with which the HMO has a contract. In an "open panel" plan the HMO or PPO contracts with independent practitioners, opening participation in the network to any provider in the community that meets the plan's credential requirements and is willing to accept the terms of the plan's contract.
Other managed care techniques

Other managed care techniques include such elements as disease management
Disease management (health)
Disease management is defined as "a system of coordinated health care interventions and communications for populations with conditions in which patient self-care efforts are significant." For people who can access health care practitioners or peer support it is the process whereby persons with...

, case management, wellness incentives
Workplace wellness
Workplace wellness is a program offered by some employers as a combination of educational, organizational, and environmental activities designed to support behavior conducive to the health of employees in a business and their families...

, patient education
Patient education
Patient education is the process by which health professionals and others impart information to patients that will alter their health behaviors or improve their health status...

, utilization management
Utilization management
Utilization management is the evaluation of the appropriateness, medical need and efficiency of health care services procedures and facilities according to established criteria or guidelines and under the provisions of an applicable health benefits plan...

 and utilization review. These techniques can be applied to both network-based benefit programs and benefit programs that are not based on a provider network. The use of managed care techniques without a provider network is sometimes described as "managed indemnity."

Blurring lines


Over time, the operations of many Blue Cross and Blue Shield operations have become more similar to those of commercial health insurance companies. However, some Blue Cross and Blue Shield plans continue to serve as insurers of last resort. Similarly, the benefits offered by Blues plans, commercial insurers, and HMOs are converging in many respects due to market pressures. One example is the convergence of preferred provider organization (PPO)
Preferred provider organization
In health insurance in the United States, a preferred provider organization is a managed care organization of medical doctors, hospitals, and other health care providers who have covenanted with an insurer or a third-party administrator to provide health care at reduced...

 plans offered by Blues and commercial insurers and the point of service
Point of service plan
A point of service plan, or POS plan, is a type of managed care health insurance system. It combines characteristics of both the HMO and the PPO. Members of a POS plan do not make a choice about which system to use until the point at which the service is being used.The POS is based on the basic...

 plans offered by HMOs. Historically, commercial insurers, Blue Cross and Blue Shield plans, and HMOs might be subject to different regulatory oversight in a state (e.g., the Department of Insurance for insurance companies, versus the Department of Health for HMOs). Today, it is common for commercial insurance companies to have HMOs as subsidiaries, and for HMOs to have insurers as subsidiaries (the state license for an HMO is typically different from that for an insurance company). At one time the distinctions between traditional indemnity insurance, HMOs and PPOs were very clear; today, it can be difficult to distinguish between the products offered by the various types of organization operating in the market.

The blurring of distinctions between the different types of health care coverage can be seen in the history of the industry's trade associations. The two primary HMO trade associations were the Group Health Association of America and the American Managed Care and Review Association. After merging, they were known as American Association of Health Plans (AAHP). The primary trade association for commercial health insurers was the Health Insurance Association of America (HIAA). These two have now merged, and are known as America’s Health Insurance Plans (AHIP).

New types of medical plans


One approach to addressing increasing premiums, dubbed "consumer driven health care
Consumer driven health care
Defined narrowly, consumer-driven health care refers to third tier health insurance plans that allow members to use personal health savings accounts , Health Reimbursement Accounts , or similar medical payment products to pay routine health care expenses directly, while a high-deductible health...

," received a boost in 2003, when President George W. Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act
Medicare Prescription Drug, Improvement, and Modernization Act
The Medicare Prescription Drug, Improvement, and Modernization Act is a federal law of the United States, enacted in 2003. It produced the largest overhaul of Medicare in the public health program's 38-year history.The MMA was signed by President George W...

. The law created tax-deductible Health Savings Accounts (HSAs), untaxed private bank accounts for medical expenses, which can be established by those who already have health insurance. Withdrawals from HSAs are only penalized if the money is spent on non-medical items or services. Funds can be used to pay for qualified expenses, including doctor's fees, Medicare Parts A and B, and drugs, without being taxed. Consumers wishing to deposit pre-tax funds in an HSA must be enrolled in a high-deductible insurance plan (HDHP) with a number of restrictions on benefit design; in 2007, qualifying plans must have a minimum deductible of US$1,050. Currently, the minimum deductible has risen to $1.200 for individuals and $2,400 for families. HSAs enable healthier individuals to pay less for insurance and deposit money for their own future health care, dental and vision expenses.

HSAs are one form of tax-preferenced health care spending accounts. Others include Flexible Spending Accounts (FSAs), Archer Medical Savings Accounts (MSAs), which have been superseded by the new HSAs (although existing MSAs are grandfathered), and Health Reimbursement Accounts (HRAs). These accounts are most commonly used as part of an employee health benefit package. While there are currently no government-imposed limits to FSAs, legislation currently being reconciled between the House of Representatives and Senate would impose a cap of $2,500. While both the House and Senate bills would adjust the cap to inflation, approximately 7 million Americans who use their FSAs to cover out-of-pocket health care expenses greater than $2,500 would be forced to pay higher taxes and health care costs.

In July 2009, Save Flexible Spending Plans, a national grassroots advocacy organization, was formed to protect against the restricted use of FSAs in health care reform efforts, Save Flexible Spending Accounts is sponsored by the Employers Council on Flexible Compensation (ECFC), a non-profit organization “dedicated to the maintenance and expansion of the private employee benefits on a tax-advantaged basis”. ECFC members include companies such as WageWorks Inc., a benefits provider based in San Mateo, California
San Mateo, California
San Mateo is a city in San Mateo County, California, United States, in the San Francisco Bay Area. With a population of approximately 100,000 , it is one of the larger suburbs on the San Francisco Peninsula, located between Burlingame to the north, Foster City to the east, Belmont to the south,...

.

Most FSA participants are middle income Americans, earning approximately $55,000 annually. Individuals and families with chronic illnesses typically receive the most benefit from FSAs; even when insured, they incur annual out-of-pocket expenses averaging $4,398 . Approximately 44 percent of Americans have one or more chronic conditions .

Because Limited Medical Benefit Plans pay for routine care and do not pay for catastrophic care, they do not provide equivalent financial security to a major medical plan. Annual benefit limits can be as low as $2,000. Lifetime maximums can be very low as well.

One option that is becoming more popular is the discount medical card. These cards are not insurance policies, but provide access to discounts from participating health care providers. While some offer a degree of value, there are serious potential drawbacks for the consumer.

Health insurance market concentration


The US health insurance market is highly concentrated, as leading insurers have carried out over 400 mergers from the mid-1990s to the mid-2000s. In 2000, the two largest health insurers (Aetna
Aetna
Aetna, Inc. is an American health insurance company, providing a range of traditional and consumer directed health care insurance products and related services, including medical, pharmaceutical, dental, behavioral health, group life, long-term care, and disability plans, and medical management...

 and UnitedHealth Group
UnitedHealth Group
UnitedHealth Group Incorporated is a diversified health and "well-being" company. Headquartered in Minnetonka, Minnesota, UnitedHealth Group offers a spectrum of products and services through two operating businesses: United Healthcare and Optum. Through its family of subsidiaries and divisions,...

) had total membership of 32 million. By 2006 the top two insurers, WellPoint
WellPoint
WellPoint, Inc. is the largest health plan company in the Blue Cross and Blue Shield Association. It was formed when WellPoint Health Networks, Inc. merged into Anthem, Inc., with the surviving Anthem adopting the name, WellPoint, Inc...

 and UnitedHealth, had total membership of 67 million. The two companies together had more than 36% of the national market for commercial health insurance. The AMA
American Medical Association
The American Medical Association , founded in 1847 and incorporated in 1897, is the largest association of medical doctors and medical students in the United States.-Scope and operations:...

 has said that it "has long been concerned about the impact of consolidated markets on patient care." A 2007 AMA study found that in 299 of the 313 markets surveyed, one health plan accounted for at least 30% of the combined health maintenance organization (HMO)/preferred provider organization (PPO) market. The US Department of Justice has recognised this percentage of market control as conferring substantial monopsony
Monopsony
In economics, a monopsony is a market form in which only one buyer faces many sellers. It is an example of imperfect competition, similar to a monopoly, in which only one seller faces many buyers...

 power in the relations between insurer and physicians.

Other types of health insurance (non-medical)


While the term "health insurance" is most commonly used by the public to describe coverage for medical expenses, the insurance industry uses the term more broadly to include other related forms of coverage, such as disability income and long-term care insurance.

Disability income insurance



Disability income (DI) insurance pays benefits to individuals who lose their ability to work due to injury or illness. DI insurance replaces income lost while the policyholder is unable to work during a period of disability (in contrast to medical expense insurance, which pays for the cost of medical care). For most working age adults, the risk of disability is greater than the risk of premature death, and the resulting reduction in lifetime earnings can be significant. Private disability insurance is sold on both a group and an individual basis. Policies may be designed to cover long-term disabilities (LTD coverage) or short-term disabilities (STD coverage). Business owners can also purchase disability overhead insurance
Business overhead expense disability insurance
Business overhead expense disability insurance pays the insured’s business overhead expenses if he or she becomes disabled. A BOE policy pays a monthly benefit based on actual expenses, not anticipated profits...

 to cover the overhead expenses of their business while they are unable to work.

A basic level of disability income protection is provided through the Social Security Disability Insurance
Social Security Disability Insurance
Social Security Disability Insurance is a payroll tax-funded, federal insurance program of the United States government. It is managed by the Social Security Administration and is designed to provide income supplements to people who are physically restricted in their ability to be employed...

 (SSDI) program for qualified workers who are totally and permanently disabled (the worker is incapable of engaging in any "substantial gainful work" and the disability is expected to last at least 12 months or result in death).

Long-term care insurance


Long-term care (LTC) insurance reimburses the policyholder for the cost of long-term or custodial care services designed to minimize or compensate for the loss of functioning due to age, disability or chronic illness. LTC has many surface similarities to long-term disability insurance. There are at least two fundamental differences, however. LTC policies cover the cost of certain types of chronic care, while long-term-disability policies replace income lost while the policyholder is unable to work. For LTC, the event triggering benefits is the need for chronic care, while the triggering event for disability insurance is the inability to work.

Private LTC insurance is growing in popularity in the US. Premiums have remained relatively stable in recent years. However, the coverage is quite expensive, especially when consumers wait until retirement age to purchase it. The average age of new purchasers was 61 in 2005, and has been dropping.

Supplemental coverage


Private insurers offer a variety of supplemental coverages in both the group and individual markets. These are not designed to provide the primary source of medical or disability protection for an individual, but can assist with unexpected expenses and provide additional peace of mind for insureds. Supplemental coverages include Medicare supplement insurance, hospital indemnity insurance, dental insurance, vision insurance, accidental death and dismemberment insurance and specified disease insurance.

Supplemental coverages are intended to:
  • Supplement a primary medical expense plan by paying for expenses that are excluded or subject to the primary plan's cost-sharing requirements (e.g., co-payments, deductibles, etc.);
  • Cover related expenses such as dental or vision care;
  • Assist with additional expenses that may be associated with a serious illness or injury.

Medicare Supplement Coverage (Medigap)



Medicare Supplement policies are designed to cover expenses not covered (or only partially covered) by the "original Medicare" (Parts A & B) fee-for-service benefits. They are only available to individuals enrolled in Medicare Parts A & B. Medigap plans may be purchased on a guaranteed issue basis (no health questions asked) during a six-month open enrollment period when an individual first becomes eligible for Medicare. The benefits offered by Medigap plans are standardized.

Hospital indemnity insurance


Hospital indemnity insurance provides a fixed daily, weekly or monthly benefit while the insured is confined in a hospital. The payment is not dependent on actual hospital charges, and is most commonly expressed as a flat dollar amount. Hospital indemnity benefits are paid in addition to any other benefits that may be available, and are typically used to pay out-of-pocket and non-covered expenses associated with the primary medical plan, and to help with additional expenses (e.g., child care) incurred while in the hospital.

Scheduled health insurance plans


Scheduled health insurance plans are an expanded form of Hospital Indemnity plans. In recent years, these plans have taken the name mini-med plans or association plans. These plans may provide benefits for hospitalization, surgical, and physician services. However, they are not meant to replace a traditional comprehensive health insurance plan. Scheduled health insurance plans are more of a basic policy providing access to day-to-day health care such as going to the doctor or getting a prescription drug, but these benefits will be limited and are not meant to be effective for catastrophic events. Payments are based upon the plan's "schedule of benefits" and are usually paid directly to the service provider. These plans cost much less than comprehensive health insurance. Annual benefit maximums for a typical scheduled health insurance plan may range from $1,000 to $25,000.

Dental insurance



Dental insurance helps pay for the cost of necessary dental care. Few medical expense plans include coverage for dental expenses. About 97% of dental benefits in the United States is provided through separate policies from carriers—both stand-alone and medical affiliates—that specialize in this coverage. Discount dental programs are also available. These do not constitute insurance, but provide participants with access to discounted fees for dental work.

Vision care insurance



Vision care insurance provides coverage for routine eye care and is typically written to complement other medical benefits. Vision benefits are designed to encourage routine eye examinations and ensure that appropriate treatment is provided.

Specified disease



Specified disease provides benefits for one or more specifically identified conditions. Benefits can be used to fill gaps in a primary medical plan, such as co-payments and deductibles, or to assist with additional expenses such as transportation and child care costs.

Accidental Death and Dismemberment (AD&D) insurance



AD&D insurance is offered by group insurers and provides benefits in the event of accidental death. It also provides benefits for certain specified types of bodily injuries (e.g., loss of a limb or loss of sight) when they are the direct result of an accident.

Status of the uninsured


Based on self-reported census data, in 2007, more than 45 million people in the US (15.3% of the population) were without health insurance as defined in the questions asked. The percentage of the non-elderly population who are uninsured has been generally increasing since the year 2000. Among the uninsured population, some 37 million were employment-age adults (ages 18 to 64), and more than 27 million worked at least part time. About 38% of the uninsured live in households with incomes over $50,000. According to the Census Bureau, nearly 36 million of the uninsured are legal US citizens. Another 9.7 million are non-citizens, but the Census Bureau does not distinguish in its estimate between legal non-citizens and illegal immigrants. It has been estimated that nearly one fifth of the uninsured population is able to afford insurance, almost one quarter is eligible for public coverage, and the remaining 56% need financial assistance (8.9% of all Americans). An estimated 5 million of those without health insurance are considered "uninsurable" because of pre-existing conditions.

The costs of treating the uninsured must often be absorbed by providers as charity care
Charity care
In the United States, charity care is health care provided for free or at reduced prices to low income patients. The percentage of doctors providing charity care dropped from 76% in 1996-97 to 68% in 2004-2005. Potential reasons for the decline include changes in physician practice patterns and...

, passed on to the insured via cost-shifting
Cost-shifting
Cost-shifting is either an economic situation where one group underpays for a service resulting another group overpaying for a service or where one group pays a smaller share of costs than before resulting in another group paying a larger share of costs than before...

 and higher health insurance premiums, or paid by taxpayers through higher taxes.

A report published by the Kaiser Family Foundation
Kaiser Family Foundation
The Henry J. Kaiser Family Foundation , or just Kaiser Family Foundation, is a U.S.-based non-profit, private operating foundation headquartered in Menlo Park, California. It focuses on the major health care issues facing the nation, as well as the U.S. role in global health policy...

 in April 2008 found that economic downturns place a significant strain on state Medicaid
Medicaid
Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states. People served by Medicaid are U.S. citizens or legal permanent...

 and SCHIP
State Children's Health Insurance Program
The State Children's Health Insurance Program – later known more simply as the Children's Health Insurance Program – is a program administered by the United States Department of Health and Human Services that provides matching funds to states for health insurance to families with children...

 programs. The authors estimated that a 1% increase in the unemployment rate would increase Medicaid and SCHIP enrollment by 1 million, and increase the number uninsured by 1.1 million. State spending on Medicaid and SCHIP would increase by $1.4 billion (total spending on these programs would increase by $3.4 billion). This increased spending would occur at the same time state government revenues were declining. During the last downturn, the Jobs and Growth Tax Relief Reconciliation Act of 2003
Jobs and Growth Tax Relief Reconciliation Act of 2003
The Jobs and Growth Tax Relief Reconciliation Act of 2003 , was passed by the United States Congress on May 23, 2003 and signed into law by President George W. Bush on May 28, 2003...

 (JGTRRA) included federal assistance to states, which helped states avoid tightening their Medicaid and SCHIP eligibility rules. The authors conclude that Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....

 should consider similar relief for the current economic downturn.

Death


Since people who lack health insurance are unable to obtain timely medical care, they have a 40 percent higher risk of death in any given year than those with health insurance, according to a study published in the American Journal of Public Health
American Journal of Public Health
The American Journal of Public Health is a monthly peer-reviewed medical journal published by the American Public Health Association covering health policy and public health. The journal was established in 1911 and its stated mission is "to advance public health research, policy, practice, and...

. The study estimated that in 2005 in the United States, there were 45,000 deaths associated with lack of health insurance.

Criticism of health insurance in the United States


The United States' system of using health insurance as a means of financing health care costs has been criticized. The following are examples of such criticisms
  • While "[p]rivate plans are attractive because of their ability to be responsive to consumer demands for choice and their innovations resulting from both the profit motive and desire to attract a larger enrollment base," they also have disadvantages. Industry consolidation "has not led to strong insurers who are willing or able to negotiate effectively with dominant hospital systems," and "[i]nsurance markets have become dominated by a small number of large insurers" with "shadow pricing" by smaller insurers.

  • Insurance companies have high administrative costs. Private health insurers are a significant portion of the U.S. economy directly employing (in 2004) almost 470,000 people at an average salary of $61,409.

  • Health insurance companies are not actually providing traditional insurance, which involves the pooling of risk, because the vast majority of purchasers actually do face the harms that they are "insuring" against. Instead, as Edward Beiser
    Edward Beiser
    Edward Beiser was an American political scientist, constitutional scholar, law professor and medical ethicist who taught at Brown University from 1968 to 2003. He also served as associate dean of Brown's medical school.Beiser was widely regarded as an authority on the Rhode Island Supreme Court...

     and Jacob Appel
    Jacob M. Appel
    Jacob M. Appel is an American author, bioethicist and social critic. He is best known for his short stories, his work as a playwright, and his writing in the fields of reproductive ethics, organ donation, neuroethics and euthanasia....

     have separately argued, health insurers are better thought of as low-risk money managers who pocket the interest on what are really long-term healthcare savings accounts.

  • According to a study by a pro-health reform group published February 11, the nation's largest five health insurance companies posted a 56 percent gain in 2009 profits over 2008. The insurers (Wellpoint
    WellPoint
    WellPoint, Inc. is the largest health plan company in the Blue Cross and Blue Shield Association. It was formed when WellPoint Health Networks, Inc. merged into Anthem, Inc., with the surviving Anthem adopting the name, WellPoint, Inc...

    , UnitedHealth, Cigna
    CIGNA
    Cigna , headquartered in Bloomfield, Connecticut, is a global health services company, owing to its expanding international footprint and the fact that it provides administrative services only to approximately 80 percent of its clients...

    , Aetna
    Aetna
    Aetna, Inc. is an American health insurance company, providing a range of traditional and consumer directed health care insurance products and related services, including medical, pharmaceutical, dental, behavioral health, group life, long-term care, and disability plans, and medical management...

     and Humana
    Humana
    Humana Inc. , founded in 1961 in Louisville, Kentucky, is a Fortune 100 company that markets and administers health insurance. With a customer base of over 11.5 million in the United States, the company is the largest Fortune 100 company headquartered in the Commonwealth of Kentucky, and has a...

    ) cover the majority of Americans with health insurance.

See also



  • America’s Health Insurance Plans
  • COBRA
  • Economic capital
    Economic capital
    -Finance and Economics:In financial services firms, economic capital can be thought of as the capital level shareholders would choose in absence of capital regulation....

  • Health care reform in the United States
    Health care reform in the United States
    Health care reform in the United States has a long history, of which the most recent results were two federal statutes enacted in 2010: the Patient Protection and Affordable Care Act , signed March 23, 2010, and the Health Care and Education Reconciliation Act of 2010 , which amended the PPACA and...

  • Healthcare reform
  • Health economics
    Health economics
    Health economics is a branch of economics concerned with issues related to efficiency, effectiveness, value and behavior in the production and consumption of health and health care...

  • Health insurance costs in the United States
    Health insurance costs in the United States
    The cost of health insurance in the United States is a major factor in access to health coverage. The rising cost of health insurance leads more consumers to go without coverage and increase in insurance costs and accompanying rise in the cost of health care expenses has led health insurers to...

  • Health Insurance Portability and Accountability Act
    Health Insurance Portability and Accountability Act
    The Health Insurance Portability and Accountability Act of 1996 was enacted by the U.S. Congress and signed by President Bill Clinton in 1996. It was originally sponsored by Sen. Edward Kennedy and Sen. Nancy Kassebaum . Title I of HIPAA protects health insurance coverage for workers and their...

  • Health maintenance organization
    Health maintenance organization
    A health maintenance organization is an organization that provides managed care for health insurance contracts in the United States as a liaison with health care providers...

  • Injury cover
    Injury cover
    Injury cover may refer to the act of receiving or claiming compensation for work related injuries.It also may be used in conjunction with:Health Insurance - A form of group insurance, where individuals pay premiums or taxes in order to help protect themselves from high or unexpected healthcare...

  • List of healthcare reform advocacy groups in the United States
  • National health insurance
    National health insurance
    National health insurance is health insurance that insures a national population for the costs of health care and usually is instituted as a program of healthcare reform. It is enforced by law. It may be administered by the public sector, the private sector, or a combination of both...

  • Physicians for a National Health Program
    Physicians for a National Health Program
    Physicians for a National Health Program , is an advocacy organization of some 17,000 American physicians, medical students, and health professionals founded by Quentin Young who support a single-payer system of national health insurance....


  • Public health
    Public health
    Public health is "the science and art of preventing disease, prolonging life and promoting health through the organized efforts and informed choices of society, organizations, public and private, communities and individuals" . It is concerned with threats to health based on population health...

  • Publicly-funded health care
    Publicly-funded health care
    Publicly funded health care is a form of health care financing designed to meet the cost of all or most health care needs from a publicly managed fund. Usually this is under some form of democratic accountability, the right of access to which are set down in rules applying to the whole population...

  • Medicare Rights Center
    Medicare Rights Center
    The Medicare Rights Center is a national, 501 nonprofit consumer service organization with offices in New York City and Washington, DC...

  • RAND Health Insurance Experiment
    RAND Health Insurance Experiment
    The RAND Health Insurance Experiment was an experimental study of health care costs, utilization and outcomes in the United States, which assigned people randomly to different kinds of plans and followed their behavior, from 1974 to 1982. As a result, it provided stronger evidence than studies...

  • Self-funded health care
    Self-funded health care
    Self-funded health care is a self insurance arrangement whereby an employer provides health or disability benefits to employees with its own funds. This is different from fully insured plans where the employer contracts an insurance company to cover the employees and dependents. In self-funded...

  • Sicko
    Sicko
    Sicko is a 2007 documentary film by American filmmaker Michael Moore. The film investigates health care in the United States, focusing on its health insurance and the pharmaceutical industry. The movie compares the for-profit, non-universal U.S...

  • Single-payer health care
    Single-payer health care
    Single-payer health care is medical care funded from a single insurance pool, run by the state. Under a single-payer system, universal health care for an entire population can be financed from a pool to which many parties employees, employers, and the state have contributed...

  • Social security
    Social security
    Social security is primarily a social insurance program providing social protection or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others. Social security may refer to:...

  • Social welfare
  • Uninsured in the United States
    Uninsured in the United States
    The number of persons without health insurance coverage in the United States is one of the primary concerns raised by advocates of health care reform. According to the United States Census Bureau, in 2009 there were 50.7 million people in the US who were without health insurance...

  • United States National Health Care Act
  • Universal health care
    Universal health care
    Universal health care is a term referring to organized health care systems built around the principle of universal coverage for all members of society, combining mechanisms for health financing and service provision.-History:...



External links



Medicare Rights Center
Medicare Rights Center
The Medicare Rights Center is a national, 501 nonprofit consumer service organization with offices in New York City and Washington, DC...

.