This article will focus on health insurance. It will provide an analysis of government and commercial health insurance plans and programs. Topics covered include employer-sponsored health insurance, fee-for-service plans, managed fee-for-service plans, health maintenance organizations (HMO), preferred provider organizations (PPO), point of service plans (POS), Medicare, Medicaid, and the 2010 Affordable Care Act. The issues associated with health care reform and universal healthcare will be addressed.
Keywords Employer-Sponsored Health Insurance; Fee-for-Service Plans; Health Care Reform; Health Insurance; Health Maintenance Organizations; Medicaid; Medicare; Preferred Provider Organizations
Health insurance, which refers to the insurance against bodily injury, disablement, or death by accident or accidental means, or the expense thereof, or against disablement or expense resulting from sickness, is available in the United States through government and private providers. In the United States, the commercial (or private) health insurance industry and the government (or public) health insurance industry serve different populations and offer a wide range of benefits and plans. The commercial health insurance industry offers plans including fee-for-service plans, managed fee-for-service plans, health maintenance organizations (HMO), preferred provider organizations (PPO), and point of service plans (POS). The main government health insurance programs include Medicaid and Medicare. In 2010, the Patient Protection and Affordable Care Act (PPACA) of 2010—commonly called the Affordable Care Act (ACA) or Obamacare after its major backer President Barack Obama—sought to reform a number of aspects of the US health insurance industry, as well as improve the access to and quality of health care services.
US Modern Public
The US modern public and private health insurance systems began in the early 1900s. The US private health insurance industry, as it is known today, began in 1929 when Baylor Hospital began offering prepaid hospital coverage to 1,200 teachers. This program was the beginning of what later became known as Blue Cross Insurance. Private health insurance programs grew in number and popularity during World War II when most wages were frozen as part of the war effort. Private companies that could not offer increased salaries began offering health benefits packages to attract potential employees. Blue Cross health insurance offered forty-three plans by 1943. The tax-foundation for our current employer-sponsored health insurance system and employer benefit plans in general was established in 1913 when Congress passed the Sixteenth Amendment legalizing the individual and corporate income tax. Corporations, which were not taxed on company-paid fringe benefits, began to deduct the cost of these benefits from their corporate income taxes. Employers today continue to balance the health insurance benefits they pay to employees with the tax exemptions offered by the Internal Revenue Service.
Variance within Health Insurance Plans
Health insurance plans vary in the benefits and services they offer, their costs, their eligibility requirements, and their approach to pricing or establishing premiums. The history of Blue Cross insurance or premium pricing is illustrative of premium pricing history for the insurance industry as a whole. In the early- and mid-1900s, Blue Cross insurance practiced a community ratings system. The community rating system refers to a pricing method used by insurers that establishes premiums based on the cost of insuring specific geographic areas. In the beginning, Blue Cross charged all plan members the same amount for coverage. The community ratings system was replaced by experience-rated premiums in which premiums are established based on the anticipated cost of insuring a specific individual or demographic subgroup (Carlstrom, 1994). "Blues plans today differ considerably from one another in such areas as market share, management philosophy, and the types of products they offer to their three primary market segments--individual, small group, and large group" (Aronovitz, 1994, p. 5).
Plans such as these have often had very strict guidelines regarding who they would cover and why. For example, in past, it was likely that anyone who wanted private coverage would have to undergo a thorough medical examination. They might not receive coverage for a prior medical condition, and this could leave them paying hundreds or even thousands of dollars in out-of-pocket expenses. Insurance companies such as the Blues have not been enthusiastic about health care reform. Reforms enacted under the 2010 Affordable Care Act (ACA) forced insurers to accept everyone, regardless of their state of health, and to cover them for prior conditions. This means insurers must pay out hundreds of thousands of dollars (possibly millions) in coverage that they formerly would never have paid.
Health insurance, possibly more than any other employee benefit or social insurance, is considered necessary for health and well-being. As a result, government, business, and society are in constant negotiation over how vital healthcare should be provided and financed.
In the United States, private and public health insurance is available based on eligibility factors. Variables that have influenced health insurance eligibility include employment status, employer coverage, age, income, disability, pre-existing conditions, and location. The following sections describe and analyze private and public health insurances. Issues addressed include benefit plans, government regulation, benefit financing, and member perception of benefits.
Private Health Insurance
Private health insurance plans include group coverage or individual coverage. Group health insurance is generally available through an employer. Factors that influence the availability of group health insurance include the size of the company and job classification. For example, hourly-wage workers are less likely to be eligible for group health insurance through their employers than salaried workers. Individual health insurance, generally more expensive than group health insurance, is available for purchase outside of an employment relationship. Individual health insurance plans tend to have more limited coverage and more pre-existing condition clauses than group health insurance. Individuals have historically chosen private health insurance plans based on factors such as availability, eligibility, individual health needs and history, pre-existing health conditions, the services provided, the costs and affordability, the location of services, and limitations on services.
Differing Health Insurance Plans
There are a wide range of private health insurance plans including fee-for-service plans, managed fee-for-service plans, health maintenance organizations (HMO), preferred provider organizations (PPO), and point of service plans (POS). These plans vary in costs and services provided (Sullivan, 1992):
- Fee-for-Service Plans: Plans that pay the full benefit no matter where employees or their dependents receive treatment.
- Managed Fee-for-Service Plans: Plans that use cost-containment and utilization reviews to balance conflicting needs of employer and employee by steering employees away from high-cost inpatient hospital stays and providing financial incentives to use lower-cost alternatives.
- Health Maintenance Organizations (HMOs): Prepaid health-care system in which the participating physicians assume the financial risk for providing care to members.
- Preferred Provider Organizations (PPOs): Prepaid health-care system in which the participating physicians assume the financial risk for providing care to members.
- Point of Service Plans: A plan which combines traditional fee-for-service and an HMO.
Government Regulation of Commercial Health Insurance
The federal government regulates commercial (or private) health insurance. The Consolidated Omnibus Budget Reconciliation Act (COBRA) and other federal laws establish the parameters for health benefit plans. Employee health plans, along with numerous other benefits, are regulated by the Employee Retirement Income Security Act (ERISA) of 1974, which sets minimum standards for most voluntarily established benefits plans in private industry in order to provide protection for individuals in these plans. Employee health benefit plans generally include coverage such as the COBRA provision to provide some workers and their families with the right to continue their health coverage for a limited time after the loss of a job, primary medical care, hospitalization coverage, mental health benefits, newborn and maternity health benefits, and cancer rights protections. In some instances, federal regulations specify the types of benefit plans that companies make available to their employees. For example, the Health Maintenance Organization Act of 1973, referred to as the HMO Act, established a dual-choice provision that required employers with twenty-five or more employees to offer federally certified HMO options alongside traditional indemnity insurance plans. The HMO Act facilitated the rapid expansion of the HMO model or plan into the health insurance system. The HMO Act also had the effect of lowering insurance costs for some large companies and increasing insurance costs for many small and medium-sized companies (Carlstrom, 1994).
Employee-Sponsored Health Insurance
The design of employee-sponsored health insurance and employee benefit plans in general has changed significantly since the 1970s. Reasons for the shift in employee benefit plan design include the shift in thinking from a paternalistic management approach to employee empowerment. In the current employee benefits environment of most organizations and institutions, employees are required to assume responsibility for making appropriate benefit plan choices. New employee empowerment benefit design plans include flex and defined contribution benefit plans. Employee benefit plans are increasingly managed through self-service benefits administration tools such as human resource information systems and benefits databases. Employers, acknowledging and responding to changes in demographics such as more working mothers and single parent households, began to rethink the traditional “one size fits all” benefits concept and designed a wider range of benefit plans to meet the needs of the increasingly heterogeneous work force. New benefit plan designs include flex plans and defined contribution benefit plans (Randolph, 1995).
Health Benefit Plan Financing
Health benefit plans are financed with a wide range of financial tools and approaches. Health insurance plans are generally funded by employer contributions, employee contributions, or some combination of funding arrangements agreed upon through negotiation and bargaining. Variables that effect plan financing include government regulations, organizational resources, plan sponsor and plan members relationship and negotiations, plan enrollment, and plan coverage. Employers finance employee benefit plans through four main tactics or approaches: Pooling, self-funding, captive insurance, and voluntary employee beneficiary associations (VEBA). The federal government regulates and oversees how employee benefit plans are financed to protect the interests of the labor force and their families. Organizations without sufficient funds to pay out retirement benefits and pensions, health-care claims, or leave benefits potentially harm individual employees and the economic health of the nation in general. The federal government regulates and encourages certain sorts of employee benefit plan financing through tax exemptions and deductions and discourages the use of other employee benefit plan financing options through restrictions, regulations, and penalties (Halterman, 2000).
Costs of Employee-Sponsored Health Insurance
According to the International Foundation of Employee Benefit Plans, few employees understand the costs associated with employee-sponsored health insurance and employee-sponsored benefit plans in general. The...
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