What is ‘Health Insurance’
Health insurance is a type of insurance coverage that pays for medical and surgical expenses incurred by the insured. Health insurance can reimburse the insured for expenses incurred from illness or injury, or pay the care provider directly. It is often included in employer benefit packages as a means of enticing quality employees. The cost of health insurance premiums is deductible to the payer, and benefits received are tax-free.
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BREAKING DOWN ‘Health Insurance’
Health insurance can be tricky to navigate. Managed care insurance plans require policyholders to receive care from a network of designated health care providers for the highest level of coverage. If patients seek care outside the network, they must pay a higher percentage of the cost. In some cases, the insurance company may even refuse payment outright for services obtained out of network. Many managed care plans require patients to choose a primary care physician who oversees the patient’s care and makes recommendations about treatment. Insurance companies may also deny coverage for services that were obtained without preauthorization. In addition, insurers may refuse payment for name brand drugs if a generic version or comparable medication is available at a lower cost.
Insurance plans with higher out-of-pocket costs generally have smaller monthly premiums than plans with low deductibles. When shopping for plans, individuals must weigh the benefits of lower monthly costs against the potential risk of large out-of-pocket expenses in the case of a major illness or accident. Health insurance has many cousins, such as disability insurance, critical (catastrophic) illness insurance and long-term care (LTC) insurance.
Affordable Care Act
In 2010, President Barack Obama signed the Patient Protection and Affordable Care Act into law. It prohibits insurance companies from denying coverage to patients with pre-existing conditions and allows children to remain on their parents’ insurance plan until they reach the age of 26. In participating states, the act also expanded Medicaid, a government program that provides medical care for individuals with very low incomes. In addition to these changes, the ACA established the federal Healthcare Marketplace. The marketplace helps individuals and businesses shop for quality insurance plans at affordable rates. Low-income individuals who sign up for insurance through the marketplace may qualify for subsidies to help bring down costs.
Americans are required to carry medical insurance that meets federally designated minimum standards or face a tax penalty. In certain cases, taxpayers may qualify for an exemption from the penalty if they were unable to obtain insurance due to financial hardship or other situations. Two public health insurance plans, Medicare and the Children’s Health Insurance Program, target older individuals and children, respectively. Medicare also serves people with certain disabilities. The program is available to anyone age 65 or older. The CHIP plan has income limits and covers babies and children up to the age of 18.
A useful guide to health insurance in Russia, including state medical insurance in Russia and private health insurance and international options for Russian health insurance coverage.
Health insurance in Russia is free for citizens and residents under the state Russian health insurance system, while those that don’t qualify will need to consider private health insurance. Russia’s Obligatory Medical Insurance (OMI) covers most basic treatments, although the Russian healthcare system may not have the best reputation in the world. The quality of care you’ll receive varies drastically around the country, with major cities such as Moscow and St Petersburg boasting some of the best hospitals while many rural areas have few or no medical facilities at all.
In addition to this service gap, public healthcare and medical insurance in Russia are suffering from budget cuts resulting in longer waiting times for patients. With this in mind, many expats moving to Russia take out private health insurance or use international insurance to ensure the quality of healthcare standard. Read Expatica’s guide to learn more about the Russian healthcare system, including:
Russian health insurance for visitors
Medical insurance for Russian visas
Obligations to take out health insurance in Russia
Applying for medical insurance in Russia
Private health insurance
Russian health insurance for students
Sick pay in Russia
Russian health insurance requirements
It’s not as easy as it once was to get healthcare coverage when visiting Russia. In January 2016, the long-standing reciprocal healthcare agreement between Russia and the UK was cancelled, and it’s a similar case if you’re visiting from the US. Foreigners are typically required to take out medical insurance to get a Russian visa or check that their private health insurance plan covers them in Russia.
Foreigners from the EU who carry an European Health Insurance Card (EHIC) should check with their home government whether they can access healthcare in Russia before travelling or relocating to Moscow. Non-EU citizens need to check if their home country has a reciprocal healthcare agreement with Russia and what they could be entitled to.
The US Embassy in Moscow provides a list of English-speaking doctors, dentists, opticians, pharmacies and hospitals for expats and visitors to the capital.
Medical insurance for Russian visas
The rules and regulations surrounding medical insurance for Russian visas are renowned for changing on a regular basis. You will need to check with the Russian mission in your home country to see if you require медицинская страховка (medical insurance) for Russia and the latest conditions. You will typically need to arrange medical insurance for a Russia visa before it will be approved.
Who is obliged to take out health insurance in Russia?
State health insurance in Russia is available to anyone with the right to live and work in Russia. Russian health insurance is funded by contributions from your employer, who pays around 2–3 percent of your salary as social security tax, with a percentage of this going toward the national healthcare fund.
Foreign nationals also need to obtain additional voluntary medical insurance in Russia (VHI) when moving. Your employer will often purchase this for you, although if you don’t receive comprehensive health insurance as a workplace benefit you may find the most basic discounted packages don’t cover you enough.
In some cases, unemployed foreign citizens with a residence permit may also be entitled to a CMI policy. They can apply for it via any medical insurance company which is subscribed to the CMI system.
Applying for medical insurance in Russia
Your employer is responsible for applying for state medical insurance in Russia on your behalf, although it is possible to register yourself by visiting a Russian insurance provider with your passport and residence permit.
It’s important to choose the right clinic when your register, as healthcare is often limited to only one location. If you’re signing up yourself, it’s worth taking a Russian speaker along with you as the staff are unlikely to speak English, or use our Russian medical dictionary.
If you have children, you’ll need to register them under your OMI plan so they can also receive medical insurance for Russia. You should be able to do this by visiting the Russian Ministry of Health (or министерство здравоохранения in Russian) with your passports, residence permit and your child’s birth certificate.
Private health insurance in Russia
Anyone can apply for private health insurance in Russia, although it’s easier if you live in a big city. For example, there are a number of private clinics and healthcare providers in Moscow, many equipped with English-speaking doctors and staff. Private health insurance in Russia is as expensive as abroad in some cases, so it pays to shop around for a good deal.
While private health insurance in Russia comes in many forms, nearly 90 percent of insurance plans are taken out by businesses for their employees as a workplace benefit. In addition to workplace Russian health insurance, it’s also possible to take out individual, family, group and international health insurance for more coverage.
It’s possible to take out tailored private health insurance plans, which typically cover some or all of the following:
Inpatient care – covers treatment that requires an overnight stay at a hospital.
Outpatient care – covers treatment that doesn’t require an overnight stay; usually offered as an optional benefit.
Chronic condition insurance – covers illnesses that have no definitive cure.
Pre-existing condition insurance – covers illnesses that existed before the plan was taken out; most plans will have a moratorium period for pre-existing conditions.
Emergency evacuation insurance – covers transport to the nearest private medical centre to receive treatment if you can’t get adequate care in your local area.
Maternity and newborn child coverage – covers scans, classes and maternity care for mothers, and for newborn children it includes vaccinations and doctors visits, and in some cases a 24-hour hotline with access to a paediatrician; there may be a waiting period after signing up for your policy when you can’t apply for maternity care.
Dental insurance – the majority of Russian citizens pay for private dental care, and if your health insurance plan doesn’t offer much protection you may consider expanding it; find dentists in Moscow with Expatica’s dental listings in Russia.
Vaccinations – generally covered as part of your outpatient plan.
Alternative therapies – includes the likes of homeopathy, osteopathy, acupuncture and herbal medicine.
Russian health insurance: Health insurance in Russia
Should you choose private health insurance?
Most middle-class Russians and expats living in Russia have private health insurance, international health insurance or simply pay upfront at private clinics when required. You can find many international medical centres in Moscow where English is spoken but these clinics tend to be more expensive than local facilities, unless you have private health insurance.
Private health insurance improves your chances of shorter waiting times, better comfort, better standard of care and being seen by a doctor who speaks your language. Russian health insurance premiums are usually calculated based on your medical history, the level of coverage you require and its geographical range.
Some foreign health insurance providers have contact with only a limited number of medical clinics, which means you can only use certain healthcare providers under your insurance policy. You can find links to the main private health centres in Moscow on Expatica’s Moscow hospital listings.
Some providers require pre-authorisation, meaning you need to contact your insurance company before any using medical services in Russia. Unless your insurance company has a direct billing agreement with the medical clinic you intend to use, you will have to advance the payment and then claim reimbursement from the insurance company later.
Russian health insurance for students
Students need to sign up to a voluntary policy for Russian health insurance upon arrival in the country, with their package covering at least inpatient and outpatient care and hospitalisation at centres close to their place of studies. Students in Russia should be able to see doctors by showing their student ID card or passport and their medical policy.
University students can also opt to take out private health insurance, either an international insurance policy in your home country or a Russian health insurance plan once you arrive in the country. If you choose the former option, you’ll usually pay for any medical services in cash and then be reimbursed by your private health insurance company when you arrive back home after your studies.
Russia health insurance: medical insurance in Russia
Sick pay in Russia
Your employer must pay sick pay while you’re off work due to illness, although you’ll need to provide them with a medical certificate when you return to work. Your employer only pays for the first three days themselves – after this time sick pay is covered by the Russian Social Security Fund.
How much sick pay you receive depends on your average salary in the previous two years. Since January 2015, foreign employees temporarily staying in Russia are also covered by the social insurance fund, as long as the employer
Health insurance in the United States is any program that helps pay for medical expenses, whether through privately purchased insurance, social insurance, or a 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 «health insurance «is used to describe any form of insurance providing protection against the costs of medical services. This usage includes private insurance and social insurance programs such as Medicare, which pools resources and spreads the financial risk associated with major medical expenses across the entire population to protect everyone, as well as social welfare programs like Medicaid and the Children’s Health Insurance Program, which both provide assistance to people who cannot afford health coverage.
In addition to medical expense insurance, «health insurance» may also refer to insurance covering disability or long-term nursing or custodial care needs. Different health insurance provides different levels of financial protection and the scope of coverage can vary widely, with more than 40% of insured individuals reporting that their plans do not adequately meet their needs as of 2007.
The share of Americans without health insurance has been cut in half since 2013. Many of the reforms instituted by the Affordable Care Act of 2010 were designed to extend health care coverage to those without it; however, high cost growth continues unabated. National health expenditures are projected to grow 4.7% per person per year from 2016 to 2025. Public healthcare spending was 29% of federal mandated spending in 1990 and 35% of it in 2000. It is also projected to be roughly half in 2025.
Trends in private coverage
The proportion of non-elderly individuals with employer-sponsored cover fell from 66% in 2000 to 56% in 2010, then stabilized following the passage of the Affordable Care Act. Employees who worked part time (less than 30 hours a week) were less likely to be offered coverage by their employer than were employees who worked full time (21% vs. 72%).
A major trend in employer sponsored cover has been increasing premiums, deductibles, and co-payments for medical services, and increasing the costs of using out-of-network health providers rather than in-network providers.
Trends in public coverage
Public insurance cover increased from 2000–2010 in part because of an aging population and an economic downturn in the latter part of the decade. Funding for Medicaid and CHIP expanded significantly under the 2010 health reform bill. The proportion of individuals covered by Medicaid increased from 10.5% in 2000 to 14.5% in 2010 and 20% in 2015. The proportion covered by Medicare increased from 13.5% in 2000 to 15.9% in 2010, then decreased to 14% in 2015.
Status of the uninsured
Main article: Health insurance coverage in the United States
The uninsured proportion was stable at 14–15% from 1990 to 2008, then rose to a peak of 18% in Q3 2013 and rapidly fell to 11% in 2015. The proportion without insurance has stabilized at 9%.
A 2011 study found that there were 2.1 million hospital stays for uninsured patients, accounting for 4.4% ($17.1 billion) of total aggregate inpatient hospital costs in the United States. The costs of treating the uninsured must often be absorbed by providers as charity care, passed on to the insured via cost-shifting and higher health insurance premiums, or paid by taxpayers through higher taxes.
Since people who lack health insurance are unable to obtain timely medical care, they have a 40% 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. The study estimated that in 2005 in the United States, there were 45,000 deaths associated with lack of health insurance. A 2008 systematic review found consistent evidence that health insurance increased utilization of services and improved health.
Uninsured patients share their experience with the health care system in the United States.
A Johns Hopkins Hospital study found that heart transplant complications occurred most often amongst the uninsured, and that patients who had private health plans fared better than those covered by Medicaid or Medicare. Gallup issued a report in July 2014 stating that the uninsured rate for adults 18 and over declined from 18% in 2013 to 13.4% by in 2014, largely because there were new coverage options and market reforms under the Affordable Care Act. Rand Corporation had similar findings.
The Affordable Care Act of 2010 was designed primarily to extend health coverage to those without it by expanding Medicaid, creating financial incentives for employers to offer coverage, and requiring those without employer or public coverage to purchase insurance in newly created health insurance exchanges. This requirement for almost all individuals to maintain health insurance is often referred to as the «individual mandate.» The CBO has estimated that roughly 33 million who would have otherwise been uninsured will receive coverage because of the act by 2022.
Repeal of the Individual Mandate
The Tax Cuts and Jobs Act of 2017 effectively repealed the individual mandate, meaning that individuals will no longer be penalized for failing to maintain health coverage starting in 2019. The CBO projects that this change will result in four million more uninsured by 2019, 13 million more by 2027.
See also: History of insurance
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, sickness coverage in the US effectively dates from 1890. The first employer-sponsored group disability policy was issued in 1911, but this plan’s primary purpose was replacing wages lost because the worker was unable 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 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. The rise of private insurance was accompanied by the gradual expansion of public insurance programs for those who could not acquire coverage through the market.
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 organizations in the 1930s. The first employer-sponsored hospitalization plan was created by teachers in Dallas, Texas in 1929. Because the plan only covered members’ expenses at a single hospital, it is also the forerunner of today’s health maintenance organizations (HMOs).
In 1935 the decision was made by the Roosevelt Administration not to include a large-scale health insurance program as part of the new Social Security program. The problem was not an attack by any organized opposition, such as the opposition from the American Medical Association that derailed Truman’s proposals in 1949. Instead, there was a lack of active popular, congressional, or interest group support. Roosevelt’s strategy was to wait for a demand and a program to materialize, and then if he thought it popular enough to throw his support behind it. His Committee on Economic Security (CES) deliberately limited the health segment of Social Security to the expansion of medical care and facilities. It considered unemployment insurance to be the major priority. Roosevelt assured the medical community that medicine would be kept out of politics. Jaap Kooijman says he succeeded in «pacifying the opponents without discouraging the reformers.» The right moment never came for him to reintroduce the topic.
The rise of employer-sponsored coverage
Employer-sponsored health insurance plans dramatically expanded as a direct result of wage controls imposed by the federal government during World War II. 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 from raising wages enough to attract 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 offers of fringe benefits, especially health care coverage, to attract workers.
President Harry S. Truman proposed a system of public health insurance in his November 19, 1945, address. He envisioned a national system that would be open to all Americans, but 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 cash to the policy holder to replace wages lost because of illness or injury. The proposal was quite popular with the public, but it was fiercely opposed by the Chamber of Commerce, the American Hospital Association, and the AMA, which denounced it as «socialism».
Foreseeing a long and costly political battle, many labor unions chose to campaign for employer-sponsored coverage, which they saw as a less desirable but more achievable goal, and as coverage expanded the national insurance system lost political momentum and ultimately failed to pass. Using health care and other fringe benefits to attract the best employees, private sector, white-collar employers nationwide expanded the U.S. health care system. Public sector employers followed suit in an effort to compete. Between 1940 and 1960, the total number of people enrolled in health insurance plans grew seven-fold, from 20,662,000 to 142,334,000, and by 1958, 75% of Americans had some form of health coverage.
Still, private insurance remained unaffordable or simply unavailable to many, including the poor, the unemployed, and the elderly. Before 1965, only half of seniors had health care coverage, and they paid three times as much as younger adults, while having lower incomes. Consequently, interest persisted in creating public health insurance for those left out of the private marketplace.
The 1960 Kerr-Mills Act provided matching funds to states assisting patients with their medical bills. In the early 1960s, Congress rejected a plan to subsidize private coverage for people with Social Security as unworkable, and an amendment to the Social Security Act creating a publicly run alternative was proposed. Finally, President Lyndon B. Johnson signed the Medicare and Medicaid programs into law in 1965, creating publicly run insurance for the elderly and the poor. Medicare was later expanded to cover people with disabilities, end-stage renal disease, and ALS.
Towards universal coverage
Persistent lack of insurance among many working Americans continued to create pressure for a comprehensive national health insurance system. In the early 1970s, there was fierce debate between two alternative models for universal coverage. Senator Ted Kennedy proposed a universal single-payer system, while President Nixon countered with his own proposal based on mandates and incentives for employers to provide coverage while expanding publicly run coverage for low-wage workers and the unemployed. Compromise was never reached, and Nixon’s resignation and a series of economic problems later in the decade diverted Congress’s attention away from health reform.
The numbers of uninsured Americans and the uninsured rate from 1987 to 2008.
Shortly after his inauguration, President Clinton offered a new proposal for a universal health insurance system. Like Nixon’s plan, Clinton’s relied on mandates, both for individuals and for insurers, along with subsidies for people who could not afford insurance. The bill would have also created «health-purchasing alliances» to pool risk among multiple businesses and large groups of individuals. The plan was staunchly opposed by the insurance industry and employers’ groups and received only mild support from liberal groups, particularly unions, which preferred a single payer system. Ultimately it failed after the Republican takeover of Congress in 1994.
Finally achieving universal health coverage remained a top priority among Democrats, and passing a health reform bill was one of the Obama Administration’s top priorities. The Patient Protection and Affordable Care Act was similar to the Nixon and Clinton plans, mandating coverage, penalizing employers who failed to provide it, and creating mechanisms for people to pool risk and buy insurance collectively. Earlier versions of the bill included a publicly run insurer that could compete to cover those without employer sponsored coverage (the so-called public option), but this was ultimately stripped to secure the support of moderates. The bill passed the Senate in December 2009 with all Democrats voting in favor and the House in March 2010 with the support of most Democrats. Not a single Republican voted in favor of it either time.
Public health care coverage
Public programs provide the primary source of coverage for most seniors and also 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 CHIP, 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 and the Veterans Health Administration and benefits provided through the Indian Health Service. Some states have additional programs for low-income individuals. In 2011, approximately 60 percent of stays were billed to Medicare and Medicaid—up from 52 percent in 1997.
Main article: Medicare (United States)
In the United States, Medicare is a federal social insurance program that provides health insurance to people over the age of 65, individuals who become totally and permanently disabled, end stage renal disease (ESRD) patients, and people with ALS. 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. Traditional Medicare requires considerable cost-sharing, but ninety percent of Medicare enrollees have some kind of supplemental insurance—either employer-sponsored or retiree coverage, Medicaid, or a private Medigap plan—that covers some or all of their cost-sharing. With supplemental insurance, Medicare ensures that its enrollees have predictable, affordable health care costs regardless of unforeseen illness or injury.
As the population covered by Medicare grows, its costs are projected to rise from slightly over 3 percent of GDP to over 6 percent, contributing substantially to the federal budget deficit. In 2011, Medicare was the primary payer for an estimated 15.3 million inpatient stays, representing 47.2 percent ($182.7 billion) of total aggregate inpatient hospital costs in the United States. The Affordable Care Act took some steps to reduce Medicare spending, and various other proposals are circulating to reduce it further.
Main article: Medicare Advantage
Medicare Advantage plans expand the health insurance options for people with Medicare. Medicare Advantage was created under the Balanced Budget Act of 1997, with the intent to better control the rapid growth in Medicare spending, as well as to provide Medicare beneficiaries more choices. But on average, Medicare Advantage plans cost 12% more than traditional Medicare. The ACA took steps to align payments to Medicare Advantage plans with the cost of traditional Medicare.
There is some evidence that Medicare Advantage plans select patients with low risk of incurring major medical expenses to maximize profits at the expense of traditional Medicare.
Medicare Part D
Main article: Medicare Part D
Medicare Part D provides a private insurance option to allow Medicare beneficiaries to purchase subsidized coverage for the costs of prescription drugs. It was enacted as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) and went into effect on January 1, 2006.
Main article: Medicaid
Medicaid was instituted for the very poor in 1965. Since enrollees must pass a means test, Medicaid is a social welfare or social protection program rather than a social insurance program. 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 because of lower reimbursement rates.
The Affordable Care Act dramatically expanded Medicaid. The program will now cover everyone with incomes under 133% of the federal poverty level who does not qualify for Medicare, provided this expansion of coverage has been accepted by the state where the person resides. Meanwhile, Medicaid benefits must be the same as the essential benefit in the newly created state exchanges. The federal government will fully fund the expansion of Medicaid initially, with some of the financial responsibility gradually devolving back to the states by 2020.
In 2011, there were 7.6 million hospital stays billed to Medicaid, representing 15.6% (approximately $60.2 billion) of total aggregate inpatient hospital costs in the United States.
Children’s Health Insurance Program (CHIP)
Main article: Children’s Health Insurance Program
The Children’s Health Insurance Program (CHIP) 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 CHIP is under title XXI of the Social Security Act. CHIP programs are run by the individual states according to requirements set by the federal Centers for Medicare and Medicaid Services, and may be structured as independent programs separate from Medicaid (separate child health programs), as expansions of their Medicaid programs (CHIP Medicaid expansion programs), or combine these approaches (CHIP combination programs). States receive enhanced federal funds for their CHIP programs at a rate above the regular Medicaid match.
Military health benefits
Main article: Military Health System
Health benefits are provided to active duty service members, retired service members and their dependents by the Department of Defense Military Health System (MHS). The MHS consists of a direct care network of Military Treatment Facilities and a purchased care network known as TRICARE. Additionally, veterans may also be eligible for benefits through the Veterans Health Administration.
Indian health service
The Indian Health Service (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, 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
Main article: Pre-existing Condition Insurance Plan
The Pre-existing Condition Insurance Plan, or PCIP, is a transitional program created in the Patient Protection and Affordable Care Act (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, 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 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 transitioned 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, some 60% of Americans are covered through an employer, while about 9% purchase health insurance directly. Private insurance was billed for 12.2 million inpatient hospital stays in 2011, incurring approximately 29% ($112.5 billion) of the total aggregate inpatient hospital costs in the United States.
The US has a joint federal and state system for regulating insurance, with the federal government ceding primary responsibility to the states under the McCarran-Ferguson Act. 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, because of the preemption clause of the Employee Retirement Income Security Act.
Employer-sponsored health insurance is paid for by businesses on behalf of their employees as part of an employee benefit 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 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.
Workers who receive employer-sponsored health insurance tend to be paid less in cash wages than they would be without the benefit, because of the cost of insurance premiums to the employer and the value of the benefit to the worker. The value to workers is generally greater than the wage reduction because of economies of scale, a reduction in adverse selection pressures on the insurance pool (premiums are lower when all employees participate rather than just the sickest), and reduced income taxes. Disadvantages to workers include disruptions related to changing jobs, the regressive tax 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: between 2001 and 2007, 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. 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 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 (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 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 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.
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. 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 brokers 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.
«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 (COBRA) enables certain individuals with employer-sponsored coverage to extend their coverage if certain «qualifying events» 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 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 Health Plan (AHP)
In the late 1990s federal legislation had been proposed to «create federally-recognized Association Health Plans which was then «referred to in some bills as ‘Small Business Health Plans.' The National Association of Insurance Commissioners (NAIC), which is the «standard-setting and regulatory of chief insurance regulators from all states, the District of Columbia and territories, cautioned against implementing AHPs citing «plan failures like we saw The Multiple Employer Welfare Arrangements (MEWAs) in the 1990s.» «[S]mall businesses in California such as dairy farmers, car dealers, and accountants created AHPs «to buy health insurance on the premise that a bigger pool of enrollees would get them a better deal.» A November 2017 article in the Los Angeles Times described how there were only 4 remaining AHPs in California. Many of the AHPs filed for bankruptcy, «sometimes in the wake of fraud.» State legislators were forced to pass «sweeping changes in the 1990s» that almost made AHPs extinct.
According to a 2000 Congressional Budget Office (CBO) report, Congress passed legislation creating «two new vehicles Association Health Plans (AHPs) and HealthMarts, to facilitate the sale of health insurance coverage to employees of small firms» in response to concerns about the «large and growing number of uninsured people in the United States.»
In 2003, according to the Heartland Institute’s Merrill Matthews, association group health insurance plans offered affordable health insurance to «some 6 million Americans.» Matthews responded to the criticism that said that some associations work too closely with their insurance providers. He said, «You would expect the head of AARP to have a good working relationship with the CEO of Prudential, which sells policies to AARP’s seniors.»
In March 2017, the U.S. House of Representatives passed The Small Business Health Fairness Act (H.R. 1101), which established «requirements for creating a federally-certified AHP, including for certification itself, sponsors and boards of trustees, participation and coverage, nondiscrimination, contribution rates, and voluntary termination.»
AHPs would be «exempt from most state regulation and oversight, subject only to Employee Retirement Income Security Act (ERISA) and oversight by the U.S. Department of Labor, and most proposals would also allow for interstate plans.»
Critics said that «Exemptions would lead to market instability and higher premiums in the traditional small-group market. AHPs exempt from state regulation and oversight would enable them to be more selective about who they cover. They will be less likely to cover higher-risk populations, which would cause an imbalance in the risk pool for other small business health plans that are part of the state small group risk pool. Adverse selection would likely abound and Association Health Plans would be selling an unregulated product alongside small group plans, which creates an unlevel playing field.» According to the Congressional Budget Office (CBO), «[p]remiums would go up for those buying in the traditional small-group market.» competing against AHPs that offer less expensive and less comprehensive plans.
The National Association of Insurance Commissioners (NAIC), the National Governors’ Association and «several insurance and consumer groups» opposed the AHP legislation. The NAIC issued a Consumer Alert regarding AHPs, as proposed in Developing the Next Generation of Small Businesses Act of 2017. H.R. 1774. Their statement said that AHP’s «[t]hreaten the stability of the small group market» and provide «inadequate benefits and insufficient protection to consumers.» Under AHPs, «[f]ewer consumers would have their rights protected, «AHPs would also be exempt from state solvency requirements, putting consumers at serious risk of incurring medical claims that cannot be paid by their Association Health Plan.»
In November 2017, President Trump directed «the Department of Labor to investigate ways that would «allow more small businesses to avoid many of the [Affordable Care Act’s] costly requirements.» Under the ACA, small-employer and individual markets had «gained important consumer protections under the ACA and state health laws — including minimum benefit levels.» In a December 28, 2017 interview with the New York Times, Trump explained that, «We’ve created associations, millions of people are joining associations. …That were formerly in Obamacare or didn’t have insurance. Or didn’t have health care. …It could be as high as 50 percent of the people. So now you have associations, and people don’t even talk about the associations. That could be half the people are going to be joining up…So now you have associations and the individual mandate. I believe that because of the individual mandate and the association».
Main article: Individually purchased health insurance in the United States
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. Although a major medical health insurance policy is primarily a catastrophic plan, qualified preventive benefits are still covered at 100% without any waiting period or copay.
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, effective since 2014, insurers are prohibited from discriminating against or charging higher rates for individuals based on pre-existing medical conditions.
In August 2008, the Hartford Courant 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. Model acts and regulations promulgated by the National Association of Insurance Commissioners (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.
Types of medical insurance
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 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 or fee-for-service plans.
Blue Cross Blue Shield Association
Main article: Blue Cross Blue Shield Association
The Blue Cross Blue Shield Association (BCBSA) is a federation of 38 separate health insurance organizations and companies in the United States. 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, and also act as administrators of Medicare in many states or regions of the United States, and provide coverage to state government employees as well as to federal government employees under a nationwide option of the Federal Employees Health Benefit Plan.
Health Maintenance Organizations
Main article: Health Maintenance Organization
A health maintenance organization (HMO) is a type of managed care organization (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 required employers with 25 or more employees to offer federally certified HMO options. Unlike traditional indemnity 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 («IPA model»). HMOs may also use a combination of these approaches («network model»).