US Health Insurance Types, History and Coverage

Distribution of National Health Spending by the Type of Financing Source

Bodenheimer (2005) noted that 45 % of healthcare spending comes from the government, 36 % from employment, 15 % out of the pocket and 4 % from other sources. 33 % was spent on hospitals, 23 % on Physicians and clinical services, 10 % on pharmaceuticals, 7 % nursing homes, 7 % private insurance administration, 8 % on other medical professionals, 4 % on equipment and supplies, 2 % on home care, and 6 % on other expenses (Bodenheimer, 2005).

Distribution of Health Insurance Coverage among the U.S. Population

According to Claxton (2008) and Kaiser Family Foundation (2013), 57 % of the American firms offer employer sponsored insurance and 77 % of their workers qualify for the scheme. The premium of an individual employee in the employer-based scheme is $5,884 in 2013. Family premium is about $ 16, 351. 23% of the firms whose employees earn low wages offer health insurance. Health insurance varies according to the industry of service and the type of job. For instance, 39% of workers in Agriculture are uninsured, compared to 7% of the uninsured workers in public administration. Non-group insurance covers 5.8% of people below the age of 65. In 2010, the monthly premium for the non-group had an average of $215. The health condition of an individual at a particular time may determine their success when it comes to the application of an insurance cover. In 2008, 29% of non-group applicants aged 60 to 64 years did not succeed (Kaiser Family Foundation, 2009, 2013).

As indicated by Kaiser Family Foundation (2013), 17.9% of the non-elderly benefits from the Medicaid and Children Health Insurance Program. The programs mainly cover the disabled, expectant mothers and children. Under the Medicaid program, poor children receive 100 percent of the cover and near poor children receive 49 percent of the cover. In 2010, it was noted that 53 percent of the uninsured children would qualify on application (Kaiser Family Foundation, 2013).

In 2012, 47.3 million Americans below the age of 65 did not have any form of health insurance. As indicated afore, most companies limit the employer-insurance benefits to the time of retirement. Over 75% of the uninsured people come from working families. 71% of the non-elderly are adults of which 85% do not have health insurance. In the recent global financial crisis (2007- 2010), the uninsured, non-elderly adults increased by 5.8million. Soon after recession (2010 -2011), the uninsured reduced by 1.2 million in population (Kaiser Family Foundation, 2013).

The Impact of the Patient Protection and Affordable Care Act on Insurance Coverage

Eibner, Hussey and Girosi (2010) state that Patient Protection and Affordable Act institute measures that see large firms, who do not offer coverage, foot for the bills of the employees of the smaller firms. The Act also provides for the introduction of subsidies to low income earners in Medicaid. The Act will promote employer-sponsored insurance programs. This will be beneficial to most workers in small firms compared to the earlier model that favored those working in large firms. It is predicted that the new law will adjust the coverage programs through exchanges. Exchanges will be run by the states which will have powers to make adjustments on implementation (Eibner, Hussey & Girosi, 2010; RAND Corporation, 2010).

The law may have little impact on the workers in large firms because most of them are already insured in the employer-sponsored programs. Therefore, the Act will increase the options of coverage, reduce the costs of administration, and widen risk pooling (Eibner, Hussey & Girosi, 2010; Kaiser Family Foundation, 2009)

A Historical Perspective of Employment-Based Health Insurance

Blumenthal (2006) outlines two historical perspectives that may have led to the emergence of employer sponsored health insurance. The first view is derived from the decision of President Franklin D. Roosevelt to adopt Social Security over the universal healthcare system. Lack of a universal health care opened a window for the emergence of private insurance services. In 1930s, Blue cross and Blue shield provided private insurance. In 1942, the government allowed the employers to expand the benefits of workers. Health care benefits resulted into employer sponsored health insurance. In 1945, the government passed a policy that would limit changes in the employee health benefits until the expiry of the contract with the employees. In 1949, the benefits were considered to be part of the wage, and in 1954, there’s lifting of tax on health insurance contributions. With reasonable legislations and strategic tax subsidies, millions of Americans received affordable services (Blumenthal, 2006; Choudhry, Rosenthal and Milstein, 2010).

The second historical view on employer sponsored insurance began in 1990 based on the decision of the Financial Accounting Standards Board (FASB) that healthcare providers of the retired employees would also be responsible for the liabilities on their balance sheets. The population of the aging retirees was increasing and this affected the cost of sustaining the programs. Most employers could not offer the health benefits beyond retirement. On the other hand, most workers fear losing their jobs because they may also lose their health insurance or be required to pay steeper premiums. Therefore, the functions of employers and insurance to the employees are still complex and require continuous improvements (Blumenthal, 2006; Baicker & Chandra, 2008).

Explain the Difference between Fully Insured and Self-Insured Health Plans

According to RAND Corporation (2010), self-insured is the scheme that allows firms to pay healthcare providers directly or reimburse the employees after the medication. In most cases, the financial expenditure on health fluctuates every year. The employer shoulders the budgetary challenges that come with such an arrangement. A fully insured plan is the arrangement that allows the company to cede the healthcare costs through an intermediary health insurer. In a fully insured arrangement, premiums are monthly payments per employee that the employer gives the insurer as the employee’s health cover claims.

On the other hand, a self –insured plan requires that the employer establishes group costs by estimating the extreme possible health cases. The employer determines the nature of healthcare providers from whom employees may seek treatment. In fully-insured plans, the insurance provider may consider the limits of coverage only after consulting the employer. However, this must be done within the Affordable Care Act. Firms with self-insured plans are likely to be affected by the drastic or comprehensive changes in medical policy. A change in policy for the fully sponsored plans may not affect a single firm or a few employees; rather it may affect both the health and the insurance industry. The cost and policy factors pose a great risk to the self-insured plan. Thus, some firms use a stop-loss policy to protect themselves from claims and financial obligations that may ground the firm (RAND Corporation, 2010; Choudhry, Rosenthal and Milstein, 2010).

References

Baicker K, & Chandra A. (2008). Myths and Misconceptions about U.S. Health Insurance, Health Affairs, 27(6), w533-43

Blumenthal, D. (2006). Employer-Sponsored Health Insurance in the United States – Origins and Implications, New England Medical Journal, 355(1), 82-88.

Bodenheimer, T. (2005). High and Rising Health Care Costs, Part 1: Seeking an Explanation. Annals of Internal Medicine, 142 (10), 847-854.

Choudhry, N., Rosenthal, M., & Milstein, A. (2010). Assessing the Evidence for Value-Based Insurance Design, Health Affairs, 29 (11), 1988-1994.

Claxton, G. (2008). How Private Health Care Coverage Works: A Primer. A Henry J. Kaiser Family Foundation Report

Eibner, C., Hussey, P., & Girosi, F. (2010) The Effects of the Affordable Care Act on Workers’ Health Insurance Coverage. New England Journal of Medicine, 363 (15), 1393-1395.

Kaiser Family Foundation (2009). Health Insurance and Access to Health Care: the Evidence.

Kaiser Family Foundation (2013). The uninsured: Key Facts about Health Insurance on the Eve of Health Reform. Menlo Park, CA: Kaiser Family Foundation.

RAND Corporation. (2010). U.S. Health Care Today: Coverage. Santa Monica, CA: RAND Corporation.