Public health care coverage

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 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 and the Veterans Health Administration and benefits provided through the Indian Health Service. Some states have additional programs for low-income individuals.

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 of Princeton and Stuart Butler among others) assert that the third-party payment feature of this program has had the unintended consequence 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. 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, 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 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.

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 relatively high administrative costs and low reimbursements. 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, 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 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 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 US as of 2004. In best cases, they 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. Efforts to pass a national pool have as yet been unsuccessful, but some federal tax money has been awarded to states to innovate and improve their plans.

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.

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. 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.

Employer-sponsored

Employer-sponsored health insurance is paid for by businesses on behalf of their employees as part of an employee benefit package. Most private health coverage in the US is employment based. According to the Centers for Medicare and Medicaid Services, nearly 100% of large firms offer health insurance to their employees. The employer typically makes a substantial contribution towards the cost of coverage. In 2008 the average employee contribution was 16% of the cost of single coverage and 27% of the cost of family coverage. These percentages have been stable since 1999.^[19] 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.

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. Employer costs have risen significantly 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, is falling. The percentage of workers actually covered 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. 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-insuring the benefits (see Self-funded health care) 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.

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.