Disc 2 IT Healthcare Admin

217
CHAPTER 9
HEALTH INSURANCE
Health insurance is very important to Americans. However, the increasing cost of health insurance makes it unaffordable for many people. Insurance premiums are now almost as high
as some mortgage payments, exceeding $1,000 a month. Deductibles have risen as well,
reaching $6,000 per year for some plans. Although employers are the main source of health insurance
for people in the United States, sometimes the cost is so high that individuals are quitting their jobs
to qualify for Medicaid. Here is an example:
Jessie McCormick quit her job to afford health care. Ms. McCormick, 27, who has a heart condition, had an opportunity to move from part time to full time in her job at a small nonprofit in
Washington. Working full time would qualify her for the firm’s health plan. But she calculated
that her out-of-pocket costs would be at least $1,200 per month, about double the money
she had left after paying her rent and utilities. Instead, she quit her job last summer so her
income would be low enough to enroll in Medicaid, which will cover all her medical expenses.
(Abelson 2019)
The rapid increase in healthcare premiums is partly attributable to the fact that many
younger and healthier people have chosen not to enroll in health insurance plans, as required by
the Affordable Care Act (ACA) of 2010. This resulted in large increases to individual insurance
premiums—averaging 25 percent in 2017—which then prompted other relatively healthy people
to drop their insurance. This, in turn, led to further premium increases for those who remained
enrolled (Alonso-Zaldivar 2017).
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com Copyright 2021. Health Administration Press. All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
EBSCO Publishing : eBook Collection (EBSCOhost) – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS
AN: 2681750 ; Kenneth L. Johnson, Stephen L. Walston.; Healthcare in the United States: Clinical, Financial, and Operational Dimensions
Account: s4264928.main.eds
218 Healthcare in the United States
For many years, healthcare was paid for directly by individuals. It was common to pay cash,
barter with goods or labor, or even prepay for future healthcare services. For most of the
seventeenth through the nineteenth centuries, healthcare costs and payments were arranged
privately between providers and patients or their families. Access to care was dependent on
a patient’s ability to pay (Allen 2016).
Health insurance in the United States has become exceedingly complex since it was
introduced in the early twentieth century. Americans now have a dizzying array of choices
of health insurance companies, plans, coverage, and deductibles. Millions of people still
buy individual healthcare plans (i.e., plans that are not provided through an employer),
whose costs have skyrocketed. Others receive healthcare coverage as a benefit of employment. Employers often give health insurance coverage to employees as a tax-deductible cost
of doing business, and employees usually receive these benefits tax-free.
Businesses see providing health benefits as an important tool for attracting and
retaining workers. However, firms can select from a wide range of health insurance plans
to offer their employees, which may have high or low deductibles and coinsurance. Sometimes, the health benefits offered to employees are nearly as valuable as their salary. For
employees with dependents, these benefits might be even more valuable than their salary.
After reading this chapter, you will be able to
➤ Explain the basic terminology used to discuss health insurance.
➤ Perceive the advantages and disadvantages of different forms of health
insurance networks.
➤ Recognize the risk involved in health insurance and how insurance changes who
assumes the risk.
➤ Comprehend the importance of selecting the correct risk pool and its effect on
health insurance.
➤ Differentiate among deductibles, coinsurance, and copays and their effects on
health insurance premiums.
➤ Describe the reasons why companies shift to self-insured healthcare coverage.
➤ Describe how adverse selection can negatively impact health insurance and why.
➤ Predict options for the future of health insurance in the United States.
Learning Objectives
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 219
However, the cost of providing health insurance benefits is becoming increasingly
unaffordable for many employers. Healthcare coverage is the largest employee-related
expense for US employers. The cost of insurance benefits for private employers in 2015
averaged $2.59 per hour worked, or 8 percent of total employee compensation. By 2018,
employers spent an average of $12,666 per employee per year on healthcare coverage (Miller
2018; SHRM 2017).
As explained in chapter 8, health insurance is a way to share the risk of healthcare
expenses. Healthcare costs a lot, and few people can afford to pay the full costs of healthcare
services by themselves. This chapter provides an overview of the concept of insurance, how
it works, why it is important, and who provides it in the United States.
The Concept of Health Insurance
Insurance is all about sharing risk among groups of people. The risk of and financial catastrophic loss caused by things such as fire, floods, car accidents, or illness cause people to seek
protection through insurance. As discussed in chapter 8, groups called risk pools contribute
money to protect one another from certain types of risk. An example of a risk pool is AARP’s
auto insurance program, which is available only to people over the age of 50. Those who buy
auto insurance through AARP pay a premium and share the risk of auto accidents. Insurance is something you need but hope you will never have to use. As a past president of the
American College of Physicians stated, “Like auto insurance, health insurance is a service
you pay for but hope you will never need. It’s there for the unpredictable, unexpected and
fundamentally uncontrollable problems that come up in people’s lives” (Olivero 2016).
Exhibit 9.1 presents a simple illustration of how insurance premiums are determined.
First, a group is selected to share a risk. This population defines the risk pool. Once the risk
pool is established, the overall expenses for the risk for this population can be determined.
Then a charge, such as a monthly premium or payroll tax, can be established to provide
the money to pay for the estimated risk for the overall risk pool.
Many people know little about how health insurance works. According to a Kaiser
Family Foundation (2019) quiz, only 76 percent of Americans could define a healthcare
premium as a monthly fee that enrollees pay to obtain health insurance coverage.
premium
The amount that is
paid (typically monthly
or annually) for an
insurance policy.
insurance
The pooling of financial
resources by groups
of people (called risk
pools) to share risk.
Exhibit 9.1
Simple Insurance
Premium Setting Risk pool
(selected
population)
Estimation
of costs of
risk pool
Premium
set for
insurance
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
220 Healthcare in the United States
Healthcare Actuaries
Estimating the cost of providing healthcare for any risk pool is a challenge. This task generally falls to actuaries. An actuary is a professional with advanced training in mathematics
and statistics who analyzes the risks and costs associated with different populations, levels
of healthcare access, quality, delivery, and financing. Healthcare actuaries analyze potential
risks, profits, and trends to set premiums. To become a certified actuary and to practice
as one, actuaries must pass a series of examinations, which may take six to ten years to
complete (Society of Actuaries 2020).
The History of Health Insurance in the United States
Health insurance was first offered in the United States in the 1920s. Before then, as you
learned in chapter 1, healthcare was inexpensive and few people used hospitals. In 1900,
the average American spent just $5 on healthcare (Blumberg and Davidson 2009). As more
sophisticated hospitals and skilled medical personnel became available, healthcare costs
escalated, and doctors sought better ways to get paid for more costly bills.
In the 1920s, Baylor Hospital in Texas was a pioneer in health insurance. The hospital
had empty beds and was struggling financially. At the same time, patients had difficulty
paying for healthcare services. Baylor sought to address both problems by establishing a
health insurance plan that initially was offered to schoolteachers in Dallas. Those who
enrolled paid $6 per year for up to 21 days of care a year in the hospital. Baylor’s plan
became hugely popular: In its first year, more than 1,300 teachers signed up for coverage, and within five years, more than 400 employee groups comprising 23,000 members
had enrolled. By 1931, Baylor had expanded its plan to New Jersey. In the 1930s, the
American Hospital Association began to build on Baylor’s concept, creating a network
of nonprofit health insurance plans. These plans soon spread across the United States,
becoming known as “Blue Cross” insurance companies (Blumberg and Davidson 2009;
Consumer Reports 2019).
In 1962, Blue Cross merged with its counterpart in the Pacific Northwest, Blue
Shield. Blue Cross and Blue Shield (BCBS) operated as a nonprofit organization and quickly
expanded across the country, becoming the most prominent health insurer for many decades.
Today, BCBS companies are a mix of nonprofit and for-profit entities that operate in every
US state. Approximately one-third of Americans receive their health insurance through
BCBS. The largest BCBS firm is Anthem, a publicly traded company that operates in 14
states (Rappleye 2015).
Health insurance became more popular during the Great Depression and then
World War II. However, by 1939, only 3 million Americans out of a total population of
131 million belonged to a health insurance plan. The growth in health insurance enrollment
actuary
A professional with
advanced training
in mathematics and
statistics who analyzes
the risks and costs
associated with
different populations,
levels of healthcare
access, quality,
delivery, and financing.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 221
was largely attributable to government regulations. In 1940s, the government mandated a
wage freeze during World War II, prompting workers to ask for health insurance as a benefit
from their employers. In 1943, the Internal Revenue Service made the health insurance
costs provided by companies tax exempt, which spurred even greater growth. The number
of Americans who had health insurance increased rapidly during this time. In 1940, only
9 percent of the US population had health insurance, but by 1953, about 63 percent had
coverage. By 2018, 91.5 percent of the nation had some type of health insurance coverage
(Blumberg and Davidson 2009; Keith 2019; Rosenthal 2017).
The US federal government continued to have a major influence in promoting
health insurance. The passage of the Social Security Amendments of 1965 introduced the
Medicare and Medicaid programs, significantly expanding health insurance for older and
low-income Americans. Today, these two programs together cover more than 100 million
people in the United States.
Another major change in health insurance in the United States occurred in 2010,
when the ACA was signed into law. The ACA made dramatic changes to the health insurance system and expanded access to health insurance in several ways:
◆ Expanding Medicaid
◆ Setting up health insurance exchanges through which individuals could buy
health insurance
◆ Preventing insurers from denying coverage and charging higher premiums for
people with preexisting conditions
◆ Requiring all individuals to obtain health insurance (called the “individual
mandate”)
◆ Penalizing employers who do not offer health insurance coverage to employees
The ACA has been controversial since its passage, and many proposals have been
put forth to overturn portions of the law, including the individual mandate (Kaiser Family
Foundation 2017; Kenen 2017). Americans hold mixed views about the ACA and its provisions. About half of Americans (52 percent) have a favorable opinion of the ACA, while
about 41 percent view it unfavorably. However, most people feel that it is important to retain
certain provisions of the ACA. Almost three-quarters (72 percent) of Americans believe
that it is important to keep the provision prohibiting insurance companies from denying
coverage for preexisting conditions. More than 60 percent believe that it is important to
cover preventive services, to prohibit lifetime limits, and to bar insurance companies from
charging higher premiums for people with preexisting conditions (Kaiser Family Foundation 2020; Kirzinger, Muñana, and Brodie 2019).
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
222 Healthcare in the United States
Community Rating Versus Experience Rating
Health insurance companies generally set premiums using one of two methods: community
rating or experience rating (exhibit 9.2). Community rating uses the general community
population (e.g., a metropolitan area) to set premiums. Under this method, everyone pays
the same rate, regardless of age, gender, or health status. The ACA required businesses with
more than 50 employees to use community rating.
In contrast, experience rating clusters people into smaller risk pools determined
by their health history, age, gender, and other factors to set premiums. Under experience
rating, healthier populations gain an advantage and pay lower premiums, but those with
greater healthcare needs tend to pay more—sometimes much more (Kaiser Family Foundation 2012; Lawley Insurance 2015).
Indemnity Versus Managed Care Model
Health insurance traditionally was based on an indemnified “fee-for-service” model. An
indemnity healthcare plan allows individuals to choose their own doctors and hospitals,
and the insurance company pays for the services that are used. With indemnity coverage,
patients have a great deal of freedom in choosing their providers and can obtain treatment directly from specialists without first having to see a primary care physician. In this
environment, healthcare providers are mostly paid on a fee-for-service basis, meaning that
providers are paid each time they provide a service to a patient.
The indemnity healthcare model creates an incentive to order more tests and
perform more services than are necessary, which leads to physician-induced demand.
Physician-induced demand occurs when unnecessary or inappropriate services are provided to serve the economic self-interest of the physician. Simply, the physician orders
more tests and services than are needed to increase his or her income (Mohamadloo et al.
2019). Researchers have long suggested that physician-induced demand has a significant
impact on healthcare demand and costs (Wilensky and Rossiter 1983).
Insurance companies found that indemnity insurance provided too much freedom
to patients and hampered their ability to control costs. As a result, most health insurance
products have moved to some form of managed care. Managed care is a type of healthcare
delivery system that is organized to manage cost, use, and quality. Managed care serves
four key functions:
1. Establishes standards for selecting providers that are part of the insurance
network
2. Sets programs for continuing quality improvement and utilization review
3. Focuses on keeping enrollees healthy and reducing the use of healthcare services
4. Provides financial incentives for enrollees to use in-network providers
community rating
A method of setting
insurance premiums
that uses the general
community population
(e.g., a metropolitan
area) as the risk pool.
experience rating
A method of setting
insurance premiums
that clusters people
into smaller risk
pools determined by
their health history,
age, gender, and
other factors to set
premiums.
indemnity healthcare
plan
A health insurance plan
that allows individuals
to choose their own
healthcare providers,
providing the greatest
amount of flexibility
for users. These plans
generally use fee-forservice payment.
managed care
A system used by
health insurance
companies to
reduce the costs and
improve the quality of
healthcare.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 223
Exhibit 9.2
Difference
Between
Community and
Experience Ratings
Community Rating
Insurance premiums are based on
average costs for a community.
Experience Rating
Insurance premiums are based on
average costs for smaller groups of a
community.
FEE-FOR-SERVICE MEDICINE
Although many people believe that fee-for-service medicine drives up the cost of
healthcare, it remains the primary way most health providers are paid for the services
they provide. Physicians recommend and order tests for their patients and get paid
for each test ordered and service delivered. Fee-for-service payments in medicine can
be compared with payments to your local car mechanic. When you take your car in
for preventive maintenance or for a problem, the mechanic recommends and provides
services. However, many consumers are unsure whether the mechanic has identified
the real problem or has recommended unnecessary services. Frequently, people lack
the knowledge they need to decide whether car repairs really need to be done, or if
they have been recommended to increase the profits of the mechanic. Fee-for-service
healthcare works the same way: A patient obtains a service, trusting the doctor to order
the right tests and services but not knowing whether too many tests are being ordered
to increase the doctor’s profits.
*
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
224 Healthcare in the United States
Managed care plans typically restrict enrollees’ ability to choose healthcare providers
by establishing networks of preferred providers. Some plans, such as health maintenance
organizations (HMOs), pay only for care within their network. Other managed care organizations, such as preferred provider organizations (PPOs) and point-of-service (POS) plans,
generally pay a portion of the cost for care obtained from a provider outside the network.
Most states have moved to managed care organizations (MCOs) to administer
their Medicaid plans. States enlist MCOs and generally pay them a fixed annual fee per
Medicaid patient. The MCO oversees the patients’ care and has financial incentives to keep
patients healthy. For instance, MCOs may offer nonmandated services such as transportation, education, and equipment that, although not required, may increase access to care
and lower overall healthcare costs. Managed care organizations may also set other policies
to lower costs by implementing utilization management systems to reduce low-value care
and improve patients’ health (Goldsmith, Mosley, and Jacobs 2018).
Healthcare Costs Beyond Insurance Premiums
Most people pay additional amounts for healthcare beyond the cost of their health insurance
premiums. These costs vary depending on the health insurance plan. Most plans require
enrollees to pay some out-of-pocket costs, coinsurance, copayments, and deductibles, and
they may impose lifetime or annual limits.
◆ Out-of-pocket costs. The amounts that individuals pay from their own resources
are known as “out-of-pocket” costs. Out-of-pocket costs are expenses that
exceed the amount that insurance pays. For example, for those who do not
have health insurance, all healthcare expenses are out-of-pocket costs. In
2017, national out-of-pocket costs for healthcare exceeded $375 billion, or
10 percent of all healthcare spending (CMS 2020). People with Medicare
coverage each spent $5,460 annually out-of-pocket costs (Cubanski et al.
2019; Orszag and Emanuel 2018).
◆ Coinsurance. Coinsurance is part of many health insurance plans. Coinsurance
requires individuals to pay a percentage of the cost for a healthcare service.
The amount varies, but most insurance plans pay for about 80 percent of the
costs, while the insured must pay the remaining 20 percent.
◆ Copays. Although the term “copay” is often used synonymously with
coinsurance, unlike coinsurance, copays are a set, flat amounts that
individuals pay for a healthcare service. For example, a plan may have a $25
copay for a physician visit or $150 for an emergency room visit.
◆ Deductibles. Deductibles are the annual amount of healthcare expenses the
insured must pay before the insurance starts covering medical costs. The
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 225
annual amount of the deductible can vary dramatically, and sometimes
reaches as much as $6,000 per year. Many healthcare providers require
deductibles to be paid prior to service (see sidebar). Higher deductibles are
a financial burden for many people. By 2019, more than a quarter of people
working for large companies and half of those working for small businesses
had annual deductibles of $2,000 or more (Abelson 2019).
◆ Lifetime or annual limits. Lifetime or annual limits set a maximum amount that
an insurance company will pay for an individual’s healthcare, either in their
lifetime or in a year. When this limit is reached, the individual is responsible
for any additional medical costs. Following the passage of the ACA, federal law
prohibited lifetime or annual limits on most healthcare coverage.
DEBATE TIME Pay Your Deductible!
Many hospitals require up-front payments of deductibles and coinsurance. For many
people, these costs are difficult to pay. For example, Aminatou Sow, a popular millennial
podcaster, was scheduled for surgery in 2018. Twenty-four hours before her surgery,
a hospital representative called to demand payment of her $4,000 deductible before
the surgery could take place. Sow tweeted, “Surgery is in ~18 hours and this woman is
telling me that I have to pay my entire deductible before surgery. [She tells me] ‘Please
use a credit card.’ How polite. I am stunned. There is a long silence and she says, ‘You
at least have to pay half to get this surgery.’” When Sow protested, the hospital staff
member threatened to cancel the surgery. Ultimately, Sow paid the deductible using her
credit card so she could go ahead with the surgery (Olen 2018). Why would a hospital
require a deductible to be paid before surgery? Should hospitals do this?
*
Reasons for Higher Premiums
People who have chronic health conditions often seek more extensive healthcare coverage.
However, younger, healthier people often do not see the value of having health insurance
and prefer less coverage. Even with the ACA’s individual mandate, many of those in the
18–34 age group chose not to sign up for health insurance after the law was implemented
(Herman 2016). Therefore, as more people with chronic health conditions signed up for
health insurance, premiums were much higher than expected. This situation illustrates the
concept of adverse selection (discussed in chapter 8): Those who anticipate having higher
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
226 Healthcare in the United States
healthcare expenses are more likely to obtain health insurance, while those who anticipate
lower expenses do not (exhibit 9.3).
If a risk pool includes only those with chronic health conditions, premiums can
become very high, as a small percentage of the population accounts for a significant share
of healthcare expenditures (see sidebar) (Mankiw 2017).
Exhibit 9.3
Adverse Selection Low-Cost Coverage
Attracts younger, healthy people,
resulting in lower premiums
Attracts older, sicker people,
resulting in higher premiums
Higher-Cost Coverage
A FEW COST SO MUCH
A small share of people account for much of the cost of healthcare. At Arches Health
Plan, a now-defunct co-op insurer in Utah, just 200 people—or 0.3 percent of its 63,000
members—accounted for 50 percent of its claims (Herman 2016). This phenomenon
is true across the United States as well: Just 5 percent of Americans are responsible
for about 50 percent of healthcare spending, and 1 percent of the population incurred
almost 22 percent of all healthcare expenses (Sawyer and Claxton 2019).
*
Another problem that may increase the cost of insurance coverage is moral hazard.
Moral hazard is the tendency for people to increase their use of healthcare, regardless of
whether doing so is necessary, because they have health insurance. Insurance companies
frequently try to minimize moral hazard in settings outside of healthcare by adding preventive
moral hazard
A situation in which
people have an
incentive to increase
their risk when they do
not bear the full cost of
the risk.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 227
requirements—for example, smoke detectors, sprinklers in buildings, and inspections to
identify fire hazards. In healthcare, high copays and deductibles not only help offset the
costs of healthcare but also reduce moral hazard.
Medical Loss Ratios
One way to gauge how much an insurance company spends on healthcare services is the
medical loss ratio, which is the percentage of total health insurance premium revenues (not
including taxes and fees) that is spent on medical claims and healthcare quality improvement
activities (as opposed to administrative and marketing expenses and profits).
medical loss ratio
The percentage of
health premium
dollars that a health
insurance plan
spends on provider
payments (e.g.,
medical and surgical
costs) as opposed to
administrative costs.
Medical Loss Ratio = Provider Payments & Quality Costs
Health Insurance Premiums
There is no optimal medical loss ratio. It can exceed 100 percent when an insurance company loses money and spends more than it collects. Normally, the medical loss
ratio is less than 100 percent, as insurance companies need to pay for their expenses and
make a profit. For instance, in 2015, as exhibit 9.4 shows, the medical loss ratio exceeded
100 percent (103 percent), which means that insurance companies lost 3 percent more
than their revenues from premiums. However, in 2018, the medical loss ratio dropped to
70 percent, indicating that insurance companies retained 30 percent of revenues after paying
Source: Data from Cox, Fehr, and Levitt (2019).
Exhibit 9.4
Health Insurance
Medical Loss Ratio,
2011–2018
80% 83% 84%
98% 103%
96%
82%
70%
0%
20%
40%
60%
80%
100%
120%
2011 2012 2013 2014 2015 2016 2017 2018
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
228 Healthcare in the United States
for medical care (Cox, Fehr, and Levitt 2019). Of note, Medicare maintains a medical loss
ratio of 97 to 98 percent (Haberkorn 2010).
The ACA required insurers to maintain a medical loss ratio of no less than 80 percent
in the individual market and 85 percent in the large-group market. If insurance companies
have lower medical loss ratios than those mandated by the ACA, they must refund money
to policyholders (Klinger 2017) (see sidebar).
Challenges of Third-Party Payment
Most healthcare costs are not paid by patients but rather by some intermediary, such as a
private insurance company or a government program, after services are rendered. Patients
may pay their deductible or coinsurance at the time of service, but the bulk of payments
are received later from the insurance company or government program. Third-party payers often serve as intermediaries between patients and providers by monitoring the cost
and quality of services (see exhibit 9.5). However, third-party payers also add much more
complexity to the healthcare system (Kordonowy 2019; Santerre and Neun 2012).
Since healthcare is mostly paid by third parties, users may consume more healthcare
services than they would if they were paying the full cost themselves. Without appropriate
cost sharing, patients may have an incentive to consume more services than are necessary.
INSURANCE REBATES
In the past, some major insurance companies had medical loss ratios as low as 68 percent, which many regard as excessive (Haberkorn 2010). Under the ACA, health insurers
now must maintain medical loss ratios of 80 percent or higher. If the ratio falls below
80 percent, the company is required to refund the difference to policyholders in the
form of a rebate.
Since 2012, millions of Americans have received rebates from their health insurance
companies as a result of the ACA. From 2012 to 2018, health insurers issued rebates
of $3.24 billion to policyholders. In 2017 alone, rebates totaled almost $447 million to
about 3.95 million people. California saw the highest average rebates, at $559 per family (Norris 2018). In 2019, these numbers jumped substantially, as insurers paid rebates
of $1.37 billion to 8.9 million Americans. Kansas had the highest per household rebate
at $1,081 (HealthInsurance.org 2020).
*
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 229
The third-party payment system also creates challenges and costs for providers to
collect their billings. During the twentieth century, most physicians were able to bill for the
amounts that they felt were reasonable and to collect most of those payments. However,
insurance companies today negotiate significant discounts and frequently delay or deny
payments. Billings may be denied for a variety of reasons. A patient may not be eligible
for the service provided, some demographic or identifying information may be missing or
incorrect, or the diagnosis codes or modifiers on the claims may not match the requirements
of the patient’s insurance. Following up on denied billings accounts for about one-third of
a physician’s billing staff time (Medscape 2019).
How Health Insurance Premiums Are Spent
On average, insurance companies that collect premiums from businesses and individuals spend about 80 cents of each premium dollar on medical expenses. Of this amount,
22 cents are spent on prescription drugs and another 22 cents on physician services. Insurance companies apply 18 cents to their operating costs and retain 3 cents of each dollar as
profit (see exhibit 9.6).
Why Have Health Insurance?
Having health insurance provides many benefits (HealthCare.gov 2020a):
◆ Provides essential health benefits that are critical to maintaining health and
treating acute health conditions and injuries
◆ Protects against unexpected medical costs
Exhibit 9.5
Direct Payment
Versus Third-Party
Payment
Direct Payment Third-Party Payment
Consumer
Insurance Company
Consumer
Provider
Provider
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
230 Healthcare in the United States
◆ Lowers the cost of healthcare
◆ Provides access to preventive care
In the United States, whether people receive the quantity and quality of healthcare
they need often depends on whether they have insurance and what kind of coverage they
have (Teitelbaum and Wilensky 2013). Having health insurance allows patients to receive
medical treatments that result in better health. One study showed that obtaining health
insurance decreases the likelihood of dying by cardiac arrest by 17 percent (Cedars-Sinai
2017). Other studies have shown that those with health insurance are three times more
likely to see a doctor, receive screening tests, and go to the emergency room when they
are seriously ill. Having insurance coverage also has been shown to reduce depression and
improve overall health (Foutz et al. 2017).
Essential Health Benefits
Under the ACA, insurers are required to provide coverage for annual checkups, preventive
care, and ten essential health services:
1. Preventive and wellness services
2. Ambulatory (outpatient) care services
3. Emergency care
4. Hospitalization
Source: Data from AHIP (2018).
Exhibit 9.6
Where Do
Health Insurance
Premiums Go?
Physician Services
$0.22
Office and Clinic Visits
$0.20
Hospital Stays
$0.16
Operating Costs
$0.17
Profits
$0.02 Prescription Drugs
$0.23
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 231
5. Maternity and newborn care
6. Pediatric care
7. Laboratory services
8. Mental health and substance use disorder services
9. Prescription drugs
10. Rehabilitative and long-term disability services
The Donald Trump administration sought to reduce or eliminate the essential benefit
requirement (Amadeo 2018), and in 2018 changes to federal rules gave states the ability to
allow insurance plans with scaled-back essential benefits (see sidebar).
STATES ALLOW INSURANCE WITHOUT ESSENTIAL BENEFITS
In 2018, the Iowa Farm Bureau started selling unregulated plans in partnership with
Wellmark Blue Cross and Blue Shield. The Iowa plans are permitted to deny coverage
to individuals with preexisting conditions. In addition, the state of Kansas passed a law
to allow similar “skimpy” health insurance plans to begin to be sold in 2019. Kansas
claimed that its plans would be 30 to 50 percent cheaper than those offered on the ACA
exchanges. Kansas regulators estimate that 11,000 to 42,000 Kansans will be covered
by the new plans.
To get around the requirements of the ACA, these states explicitly declare that the
plans are not licensed or regulated as health insurance. However, some people are
concerned that these scaled-back plans could destabilize the ACA market and drive up
premiums (Meyer 2019).
*
Who Provides Health Insurance?
Broadly speaking, there are two types of health insurance: private health insurance and
public or government-provided health insurance, such as Medicare, Medicaid, or TRICARE
for active-duty military personnel and their dependents. The US government’s policy
regarding health insurance remains at odds with almost all other advanced countries. Most
other industrialized countries offer some form of universal health coverage to their citizens.
However, the US government provides health insurance for only segments of the population
and allows private health insurance to cover most of the remaining people.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
232 Healthcare in the United States
Exhibit 9.7 shows that a majority of Americans, 56 percent, get their insurance from
their employers, while the government covers more than 37 percent of the population.
Major Private Insurance Companies
The private insurance market is dominated by big companies. Exhibit 9.8 shows that in
2018, the five largest US health insurance companies brought in about $453 billion of
revenues and enrolled more than 138 million people. The largest health insurance company,
United Health Group, has almost 50 million enrolled members.
Exhibit 9.7
Healthcare Coverage by Type of Insurance, 2013–2016 (thousands)
Coverage
Type 2013 2014 2015 2016 2017
Number Rate Number Rate Number Rate Number Rate Number Rate
Total 313,401 316,168 318,868 320,372 323,156
Any health
plan 271,606 86.7% 283,200 89.6% 289,903 90.9% 292,320 91.2% 294,613 91.2%
Any private
plan 201,038 64.1% 208,600 66.0% 214,238 67.2% 216,203 67.5% 217,007 67.2%
Employment
based 174,418 55.7% 175,027 55.4% 177,540 55.7% 178,465 55.7% 181,036 56.0%
Direct
purchase 35,755 11.4% 46,165 14.6% 52,057 16.3% 51,961 16.2% 51,821 16.0%
Any government plan 108,287 34.6% 115,470 36.5% 118,395 37.1% 119,361 37.3% 121,965 37.7%
Medicare 49,020 15.6% 50,546 16.0% 51,865 16.3% 53,372 16.7% 55,623 17.2%
Medicaid 54,919 17.5% 61,650 19.5% 62,384 19.6% 62,303 19.4% 1,007 19.3%
Military 14,016 4.5% 14,143 4.5% 14,849 4.7% 14,638 4.6% 15,532 4.8%
Uninsured 41,795 13.3% 32,968 10.4% 28,966 9.1% 28,052 8.8% 28,543 8.8%
Source: Data from US Census Bureau (2018).
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 233
The health insurance business continues to be profitable. In the second quarter
of 2019, even amid a continued uncertainty about the future of healthcare, the top five
companies had more than $11 billion in net earnings (Minemyer 2019).
The Financial Burden of Healthcare Costs
High medical bills are one of the most common reasons Americans file for personal bankruptcy (Olivero 2016). Although even people with health insurance can struggle with the
high costs of healthcare, those without insurance experience greater hardship. In fact, the
uninsured often pay substantially more than those with insurance for the same services.
Hospitals often charge uninsured patients two to four times the amount that private insurance and government programs pay (Foutz et al. 2017). Individual hospitals, however,
dictate how much the uninsured are charged. Many hospitals offer standard discounts
for low-income patients, but almost half (45 percent) of not-for-profit hospitals routinely
bill such patients, whose incomes are often low enough to qualify them for charity care.
These hospitals collected $2.7 billion from patients who should have qualified for financial
assistance (Rau 2019).
Uninsured patients are charged much more than the actual cost of care. Hospitals
deeply discount their prices for insurance companies, but those without insurance often
have to pay closer to the listed price. Therefore, the uninsured can pay dramatically more
than the insured. For example, a John Hopkins University study of emergency room charges
Exhibit 9.8
Largest US
Health Insurance
Companies by
Revenues and
Subscribers, 2018
United
Health
Group
Anthem Aetna Humana Centene TOTAL
Revenues – Billions $201 $90 $60.60 $53.70 $48.30 $453.60
Subscribers – Millions 49.5 40.2 22.2 14 12.2 138.1
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
Source: Data from Haefner (2019).
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
234 Healthcare in the United States
showed that an insured person typically pays a $50 to $100 copay, but a person without
insurance could pay $150 to $3,000 for the same visit (Hunt 2019).
A study by the Kaiser Family Foundation (Garfield, Orgera, and Damico 2019)
found that those without health insurance
◆ are charged two to four times what health insurers and public programs
actually pay for services,
◆ are often asked to pay the full cost of care before they can see a doctor,
◆ have fewer overall medical costs but pay a greater percentage of those costs out
of pocket, and
◆ have greater difficulty paying their medical bills and have little savings.
Paying for Deductibles and Coinsurance
To help employees pay for out-of-pocket costs, coinsurance, copays, deductibles, and other
approved healthcare expenses, employers and the federal government established health
reimbursement accounts (HRAs), health savings accounts (HSAs), and flexible spending
accounts (FSAs). Employees can use the money in these accounts to pay for qualified
medical, prescription, dental, and vision expenses. Contributions to these accounts typically are tax exempt.
◆ HRAs are accounts that are funded solely by the employer. The employer
determines the amount that will be contributed to the account and retains
any unused dollars. The employer decides whether the HRA will pay directly
for healthcare expenses not covered by the employee’s health insurance plan
or whether it will reimburse employees for payments made after a certain
amount is reached.
◆ HSAs allow employees to set aside tax-free dollars to pay for medical expenses.
HSAs are available only to employees enrolled in high-deductible healthcare
plans—typically, plans with deductibles of at least $1,350 for individuals
and $2,700 for families. In 2017, employees could contribute $3,400 for
individuals and $6,750 for families. Some advantages of HSAs are that
unused funds typically roll over from year to year and employees retain
ownership of the accounts even if they change jobs (HealthCare.gov 2020b).
◆ FSAs are accounts to which both the employee and the employer can
contribute tax-free dollars to up to a federally set maximum. In 2018, the
contribution maximum for employees was $2,650 (Miller 2017). These
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 235
monies can be used to pay deductible, coinsurance, and other qualified
healthcare expenses. However, the monies must be used each fiscal year or
they are generally returned to the employer.
Fully Insured and Self-Insured Companies
Companies can choose to be fully insured or self-insured (self-funded). A fully insured
company provides a traditional health insurance plan in which the company pays a fixed
premium to an insurance firm for coverage of its employees for a one-year period. The premium rate is fixed for the year, and total amount paid depends on the number of enrolled
employees. The insurance company is then responsible for paying healthcare claims based
on the coverage provided. The insurance company keeps any monies remaining or takes a
loss if more money is paid for healthcare expenses (Merhar 2016).
Self-insured companies, conversely, provide their own healthcare plan, which allows
them to save the profits and high overhead of some insurance companies. Rather than pay
an insurance firm a premium, the company retains financial responsibility for all employee
healthcare costs. Companies can reduce their risk by buying stop-loss insurance. A stoploss policy does not directly insure employees or pay healthcare bills, but rather pays the
company when it experiences very high medical costs. For instance, a company may absorb
fully insured company
A company that pays
a set annual premium
to a health insurance
firm to provide
healthcare coverage
to its employees; in
this arrangement,
the health insurance
company assumes the
financial risk.
self-insured company
A company that offers
its own healthcare
coverage and retains
financial responsibility
for all employee
healthcare costs; in
this arrangement, the
company assumes the
financial risk.
stop-loss insurance
An insurance policy that
provides protection
against large losses for
companies that selffund their employee
benefit plans; the policy
pays out after a certain
threshold of healthcare
costs is reached.
XYZ COMPANY SELF-INSURES
XYZ Company employs 1,000 people. Traditionally the company was fully insured,
purchasing a healthcare plan from Blue Cross. Its rates began rising rapidly, however, and by 2016, the company was paying about $5,500 per employee, or payments
of $5.5 million. In the hope of saving money, XYZ decided to become self-insured.
The company calculated that if it could keep employees’ healthcare costs below $5.5
million, it would save money. Becoming self-insured allowed XYZ to drop some of its
coverage and increase employees’ deductibles. The company also hired a third-party
administrator that would work with XYZ to directly negotiate rates with local hospitals,
audit its bills, reduce administrative costs, and increase their cash flow.
To moderate the risk of high healthcare costs, XYZ bought a stop-loss insurance
policy that would pay for any individual claim over $120,000 and for all claims once the
company’s aggregate claims exceeded $10 million. Although the cost of the stop-loss
policy was high, the company expected that it would easily pay for itself.
*
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
236 Healthcare in the United States
the first $3 million in healthcare costs, but stop-loss insurance pays for costs over $3 million.
This way, companies are protected from large claims and their associated costs. A survey
conducted in 2019 makes clear the importance of stop-loss insurance: Almost two-thirds
of companies had individual healthcare claims over $500,000, and one-third had single
claims in excess of $1 million (Wooldridge 2019).
Companies can pay for their healthcare costs directly or hire a third-party
administrator (TPA). A TPA is an entity that performs administrative services such as
claims processing for a self-insured employer. For example, Pennsylvania State University
in 2018 selected Aetna to be its TPA for medical benefits and CVS Caremark to administer
its prescription drug benefits (Pennsylvania State University 2017).
How Companies Can Lower Healthcare Costs
Almost everyone is affected by the escalating costs of healthcare. Companies continue to
take a variety of actions to blunt the costs. Businesses have suggested that the following
actions can help control the costs of healthcare (SHRM 2017):
◆ Create an organizational culture that promotes health and wellness.
◆ Offer a variety of PPO plans, including those with high and low deductibles
and copays.
◆ Increase employees’ share of the total costs of healthcare.
◆ Offer an HMO health plan.
◆ Provide incentives or rewards to promote health and wellness.
◆ Place limits on or increase cost sharing for spousal healthcare coverage.
◆ Increase employees’ share of brand-name prescription drug costs.
Others suggest that more systemic changes need to be made, including streamlining the convoluted and expensive healthcare billing systems present in the United States.
Some estimate that simplifying the medical billing system could save up to 20 percent of
healthcare costs. Cost savings could also be realized by lowering the cost of prescription
drugs and by allowing younger and healthier people to enroll in Medicare (Lee 2017).
How Patients Can Lower Healthcare Costs
Patients should review their medical bills for errors, which are common. One study suggests
that almost 80 percent of medical bills contain errors, resulting in significant overpayments (Modern Healthcare 2019). Patients can ask for an itemized bill that lists all supplies,
third-party
administrator (TPA)
A company that provides
claims processing and
employee benefits
management without
assuming any financial
risk.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 237
medications, and procedures for which they are being charged. To manage large bills, patients
may hire a billing advocate, who is paid based on the savings realized (Thimou 2017).
Patients can also consider asking for a discount on the amount they owe. Hospitals
tend to collect only about 30 percent of charges billed. As a result, around 70 percent of
billed charges are “written off” as contractual allowances or contractual adjustments, which
are the discounts that hospitals give to insurance companies, or bad debt, which is money
that people owe but do not pay. These adjustments occur because Medicare, Medicaid, and
private insurance companies negotiate agreements and contracts to pay much less than the
billed amounts. For example, health insurance companies generally pay 30 to 37 percent
of what hospitals bill them (Belk 2017; Gee 2019). When patients show they are making
an effort to pay their bills, providers and their billing departments often will negotiate the
amount that is owed.
Balance Billing
Healthcare costs to patients can also become extremely expensive if balance billing is used.
Balance billing is the practice of billing patients for the difference between what their health
insurance pays and what the healthcare provider charges. Balance billing is sometimes
referred to as “surprise billing.” This often occurs when the provider or hospital is not part
of the patient’s insurance network. For instance, a patient who had a bicycle accident and
was taken to a hospital in San Francisco was billed $24,074.50 for the emergency room
treatment. However, since the hospital was not part of her insurance company’s network, the
insurance company paid only $3,830.79, leaving her with a bill of $20,243.71 (Kliff 2019).
Balance billing imposes a heavy financial burden on patients. In fact, six states—
California, Connecticut, Florida, Illinois, Maryland, and New York—have banned balance
billing, and other states are considering restricting it (Hoadley, Lucia, and Kona 2019).
Federal legislation has also been introduced to address balance billing, as it has become
part of the national debate on healthcare costs (Bluth 2019).
Common Types of Health Insurance Networks
Most health insurance companies use some type of network to control cost while maintaining quality. Network providers are employed by the network or agree to accept lower
fees and other restrictions to belong to the network. The most common types of networks
are as follows:
◆ A health maintenance organization (HMO) is a type of insurance plan that
generally requires all enrollees to have a primary care physician (PCP) who
serves as a gatekeeper, meaning that the PCP must provide the patient with a
referral to see a specialist. Out-of-network care is generally not covered.
balance billing
The practice of
billing patients for the
difference between
what their health
insurance pays and
what the healthcare
provider charges; also
known as surprise
billing.
contractual allowances
The difference between
the amount that
healthcare providers
bill for services and
the amount they are
paid, based on their
contracts with thirdparty insurers and
government programs
such as Medicare
and Medicaid; also
called contractual
adjustments.
bad debt
Charges for services
that are billed but
uncollectible and are
not charity care.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
238 Healthcare in the United States
◆ A preferred provider organization (PPO) is a group of providers that contract
with an insurer or third-party administrator to deliver coverage to those
insured. Enrollees generally receive substantial discounts when they use the
PPO providers.
◆ A point-of-service (POS) plan has qualities of both an HMO and a PPO.
Enrollees may be required to have a PCP who makes referrals to specialists.
These plans allow patients to receive care from out-of-network providers with
a higher deductible or copay.
◆ An exclusive provider organization (EPO) is an insurance plan that only covers
healthcare services provided by providers within the plan’s network.
As exhibit 9.9 shows, HMOs tend to be the most restrictive plans but also have
lower deductibles. PPOs provide greater flexibility for patients to choose providers, but
they also have higher deductibles.
Employees in the United States receive coverage from all four network types. As
shown in exhibit 9.10, most companies (81 percent) offer a PPO, and more than half of
all employees (52 percent) choose the PPO option. HMOs are the next most popular type
of plan, with 29 percent of companies offering an HMO and 13 percent of employees
choosing this type of plan. POS and EPO plans are least popular, with 13 percent and 7
percent of companies offering them and 6 percent and 3 percent of employees enrolling,
respectively (SHRM 2017).
Plan Type PPO EPO POS HMO
Out-of-network benefits Yes No Yes No
Primary care physician required No Sometimes Yes Yes
Referral required to see a specialist No No Sometimes Yes
Flexibility Highest High Medium Low
Cost Highest High Medium Low
Preauthorization required Usually Usually No No
2015 median annual in-network deductible $1,000 $1,000 $1,000 $300
2015 median annual out-of-network deductible $2,000 $700 $2,000 $0
Source: Data from SHRM (2017).
Exhibit 9.9
Comparison of HMO, PPO, POS, and EPO Plans
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 239
The Future of Health Insurance
The future of health insurance remains anyone’s guess. The nation’s political leaders espouse
radically different solutions to address the problems inherent in our current system of health
insurance. Among the many proposals for reforming healthcare, three options stand out:
(1) businesses taking more responsibility for health insurance; (2) healthcare providers
and insurance companies working together to create new health insurance options; and
(3) government-provided health insurance for all.
A number of companies are taking action to address burgeoning healthcare costs.
In early 2018, three of the biggest companies in the United States employing more than
1 million people—Amazon, Berkshire Hathaway, and JPMorgan—announced that they
were forming an alliance to “create a company free from profit-making incentives and
constraints . . . that will provide US employees and their families with simplified, high-quality
and transparent healthcare at a reasonable cost.” This effort could take out the middleman
and may lead to the launch of new insurance company (Bomey and Weise 2018). Others
call for businesses to eliminate insurance companies as intermediaries and contract directly
with healthcare providers (Miller 2019).
Healthcare providers and others are also taking actions to change existing insurance
relationships. These might involve providers, pharmacies, and insurers merging or providers building their own insurance companies and providing specialized offerings such as
concierge medicine or direct primary care.
A number of healthcare systems have gone into the insurance business, and many
more may do so. In 2017, more than 100 health systems operated insurance plans, more
Exhibit 9.10
Shares of Network
Types Offered
by Employers
and Used by
Employees
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
PPO HMO POS EPO
% Companies Offer 81% 29% 13% 7%
% Employees Choose 52% 13% 6% 3%
Source: SHRM (2017).
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
240 Healthcare in the United States
are considering this option (Keckley 2017). Other healthcare companies, such as CVS,
are partnering with insurance companies such as Aetna to seek efficiencies and to provide
more effective healthcare (see sidebar).
CVS MERGES WITH AETNA
Will the merger of insurance companies and pharmacy companies help solve our healthcare crisis? In November 2018, CVS, with its 9,700 pharmacies and 1,100 walk-in clinics,
merged with Aetna, the nation’s third-largest health insurance company. The merger
proposed to lower drug prices and make care more effective by establishing primary
care clinics at pharmacies. This merger was unique in that it crossed industry sectors
and realigned previously competing business incentives. Some felt that the merger was
a defensive strategy to head off new Amazon ventures in healthcare. However, analysts
feel that CVS’s knowledge of consumer behavior will help the company meet healthcare
consumers’ needs and achieve its mission of “helping people on their path to better
health” (Binder 2018; CVS 2018).
*
Specialized Healthcare Options
Two specialized options mentioned earlier include concierge medicine and direct primary
care (DPC). In concierge medicine, physician practices charge patients a flat fee (monthly or
annually) for “enhanced” services and greater access to healthcare. These enhanced services
may include same-day access to a doctor, online consultations, unlimited office visits with
no copay, free prescription refills, house calls, and preventive care services. Most concierge
medicine services also bill patients’ insurance.
Concierge practices generally charge fees beginning at $175 a month, but some
charge upwards of $5,000 per year. Most practices that move to concierge medicine keep
only 15 to 35 percent of their existing patients, about 300 to 600 patients. The rest of
their patients, up to 3,500 people, must find care with another physician (Colwell 2016;
Schwartz 2017).
Direct primary care is similar to concierge medicine in that patients pay a monthly
or annual fee for enhanced services and access. DPC differs from concierge medicine, however, as practices do not bill insurance for medical visits, and generally no third party (i.e.,
insurance company) is involved. Therefore, all of the work associated with billing, claims,
and coding is eliminated. DPC services generally include basic lab tests, vaccinations, and
concierge medicine
A model of healthcare
in which patients
pay an annual fee or
retainer to be a part
of a primary care
physician’s practice.
Patients receive greater
physician access and
enhanced services.
The physician may bill
the patient’s health
insurance.
direct primary care
(DPC)
A model of healthcare
in which patients pay
a flat membership
fee for a package of
primary care services.
The physician does not
bill the patient’s health
insurance.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 241
generic drugs at near cost. Practices using both of these models derive most of their revenues
from membership fees and generally experience an increase in profitability (Qamar 2014).
DPC practices tend to charge a bit less, with monthly fees around $100. DPC practices
have larger patient panels of 600 to 800 per physician (Colwell 2016).
Some studies suggest that these models provide better care. A study of concierge
medicine showed that patients using this model of care decreased hospital use, with 56
percent fewer nonelective admissions and more than 90 percent fewer readmissions (Goodman 2014). Another study indicated that patients in a DPC model had 27 percent fewer
emergency room visits and 60 percent fewer hospital days, and their healthcare cost their
employers 20 percent less (Beck 2017).
Value-Based Payments
Most insurance products (private and government provided) are shifting from fee-for-service
payment arrangements to value-based payments for healthcare services. Value-based payment seeks to improve quality while promoting cost-efficient care. This is done by altering
incentives to focus on value by rewarding better health outcomes and lower spending.
Often coinsurance is lower for high-value services such as preventive care, medications for
chronic diseases, and emergency care. Providers are reimbursed at higher rates for improved
quality of care and better patient health outcomes. Some insurance companies, such as
Humana, have noted a 20 percent decrease in spending as a result of implementing valuebased models (Gruessner 2017; Sanicola 2017).
VALUE-BASED PAYMENT SYSTEMS CONTINUE TO GROW
Are value-based payment systems the way of the future? By 2014, about 40 percent
of private insurance payments to physicians and hospitals included a quality component as a factor in the provider’s compensation, compared with less than 3 percent in
2010. Insurance companies are now holding providers accountable for their patients’
health and moving away from traditional fee-for-service medicine. The Centers for
Medicare & Medicaid Services is also committed to moving healthcare to valuebased payments (Zimlich 2017). Value-based payment systems provide incentives
for greater collaboration among healthcare providers and encourage more efficient,
effective care. Yet changing healthcare’s structures and professional relationships
remains a challenge.
*
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
242 Healthcare in the United States
Single-Payer System
Many people in the United States believe that the country should move toward a single-payer
system for healthcare, which effectively could eliminate most health insurance companies
and establish a single entity to coordinate health insurance (Fuchs 2018). Single-payer
systems exist in countries such as South Korea and Canada. A large portion of the US
population and some physician and nursing groups support single-payer plans, which is
also referred to as “Medicare for all.” A single-payer system is projected to reduce healthcare spending by about $600 billion by reducing administrative and pharmaceutical costs.
However, political pressures and opposition from affected businesses, coupled with large
potential tax increases, may prevent the implementation of such a system in the United
States (Adamczyk 2017; Physicians for a National Health Program 2018).
single-payer system
A healthcare payment
system that has a
single entity that pays
healthcare providers.
Summary
Health insurance in the United States is complex and increasingly expensive. Health insurance exists to help people pay for their medical expenses. Any type of insurance transfers
risk from an individual to a group of people, called a risk pool. Everyone in the risk pool
contributes money (in the form of premiums) that covers all of the members for a given risk.
Health insurance was first offered in the United States in the 1920s and became common in
the 1950s and 1960s. Initially, most companies offering health insurance were not-for-profit
companies. Since the 1990s, most insurance companies are for-profit firms.
Health insurance traditionally was based on an indemnity, fee-for-service model. This
model allows patients to choose their own providers, and the insurance company pays for
the services that are used. Today, however, almost all insurance products are based on a
managed care model that directs patients to networks of providers and reviews and manages cost and use.
Premiums for health insurance are set by one of two methods: community rating or
experience rating. Community rating uses the general community population as the risk
pool to establish premiums. Everyone in the community pays the same premium. Experience
rating, however, clusters people by their health history, age, gender, and other factors. Those
with greater healthcare needs pay higher premiums than those who are healthier.
Most health insurance plans require enrollees to pay some out-of-pocket costs,
coinsurance, copays, and deductibles. Out-of-pocket expenses are costs that individuals
pay above and beyond their insurance premiums. Coinsurance and copayments require individuals to pay a share of the cost for health services. Deductibles are the annual amount
of healthcare expenses the insured must pay before the insurance starts covering medical
costs. In addition, some health plans impose lifetime or annual limits.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 243
Economic concepts that affect the provision of health insurance include adverse selection, moral hazard, medical loss ratios, and third-party payments. Each of these factors
influences the use or misuse of healthcare services and insurance.
Almost half (44 percent) of health insurance premiums go toward prescription drugs
and physician services. The average health insurance company spends about 21 percent of
premiums on overhead operating costs and profits.
There are two types of health insurance: private health insurance and public or
government-provided health insurance. More than half of Americans are covered by employer-provided health insurance; government insurance covers more than one-third of the
population. The largest health insurance company in the United States is United Health
Group, which earns revenues of $180 billion and covers more than 70 million enrollees. In
total, the top five US insurers generate more than $430 billion a year in revenues and cover
more than 160 million people.
People in the United States struggle with the high costs of healthcare. High medical
bills are the most common reason for personal bankruptcy. The uninsured tend to pay much
more for healthcare services than the insured.
Health reimbursement accounts (HRAs), health savings accounts (HSAs), and flexible
spending accounts (FSAs) exist to help individuals pay for out-of-pocket costs, coinsurance,
copays, deductibles, and other approved healthcare expenses. Contributions to these
accounts typically are tax exempt.
Businesses can either be fully insured or self-insured. A company that is fully insured
provides a traditional health insurance plan in which the company pays a fixed premium to
an insurance firm for coverage of its employees; the insurance company assumes the risk
for medical costs. Self-insured companies provide their own healthcare plan and retain
financial responsibility for all employee healthcare costs. To minimize the risk of large losses,
self-insured companies may buy stop-loss insurance. Some self-insured companies employ
a third-party administrator to perform administrative services such as claims processing.
Most health insurance plans use some type of network, such as a health maintenance
organization (HMO), preferred provider organization (PPO), point-of-service (POS) plan,
or exclusive provider organization (EPO). These networks are formed to control costs and
monitor quality. HMOs tend to be the most restrictive networks but have lower deductibles.
More than half of employees in the United States are insured through a PPO.
The future of health insurance remains uncertain. Businesses are creating new models to address the problems inherent in our current system of health insurance. Likewise,
healthcare providers and insurance companies are evolving to streamline care. Specialty
care options such as concierge medicine and direct primary care have emerged. Most insurance companies are shifting from fee-for-service payment arrangements to value-based
payment. Finally, some recommend the introduction of a single-payer system to coordinate
health insurance.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
244 Healthcare in the United States
1. Why is it important to know the risk pool for health insurance?
2. What is the purpose of health insurance?
3. What are the downsides of traditional indemnified health insurance plans? Why
have most insurers shifted to managed care?
4. What are the advantages and disadvantages of community rating and experience
rating to set health insurance premiums?
5. What causes adverse selection in health insurance?
6. Does moral hazard exist in healthcare?
7. How is a medical loss ratio determined?
8. How does having health insurance improve a person’s health?
9. What are the differences between health reimbursement accounts, health savings
accounts, and flexible spending accounts?
10. Why would a business want to be self-insured rather than fully insured?
Questions
Assignments
1. Take the Kaiser Family Foundation’s Health Insurance Quiz at www.kff.org/quiz/
health-insurance-quiz/.
a. How did you score?
b. What questions did you get wrong?
2. Kristi has a high annual deductible of $3,000. She falls from a loft and breaks her
hip and arm. She visits an emergency room and has surgery, both at a hospital that
is part of her insurance plan’s network. The total costs are $13,000. Her plan also
has a 20 percent coinsurance and a $10,000 annual out-of-pocket limit.
Trevor is insured through his father’s university healthcare plan, which requires
no coinsurance or deductible. He pays a $25 copay per physician visit if services
are provided in the network, but 25 percent coinsurance and a $350 deductible for
services provided out of the network. Trevor has surgery on his wrist that is billed at
$12,000 for the hospital and doctor. Trevor used in-network services and had three
doctor visits.
a. What out-of-pocket expenses do Kristi and Trevor incur?
b. How much would Trevor have paid out of pocket if he had chosen to use an outof-network service?
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 245
Anthem’s Avoidable Emergency Room Policy
Anthem, one of the largest healthcare insurers in the United States, implemented an “avoidable ER” policy to help manage the care of its enrollees. The policy stated that Anthem
would not pay for emergency room visits if the company determined that the visit was not
necessary. The policy, which was instituted in six states beginning in 2015, was meant to
encourage patients to seek care in appropriate settings. However, providers feel that this
policy might cause patients to avoid emergency treatment, even when it is necessary. In
response to customer and provider complaints, Anthem created several exceptions: Claims
will be covered if a healthcare provider tells a patient to go to the emergency room, if the
patient is under 15 years of age, if the patient is outside his or her state of residence, and
if the patient had a CT scan or MRI or underwent surgery. Still, providers are unhappy with
the policy (Livingston 2018).
Discussion Questions
1. Why did Anthem implement this policy?
2. How is this policy an example of managed care?
3. What other solutions could be used to minimize costs but ensure access and
quality?
The Confusion of Marketplace Healthcare Coverage
Cyndee has been on five insurance plans in five years. Her job does not offer health
insurance. Each year, after finally figuring out her plan’s deductibles, network, and
covered drugs, she has gotten a cancellation notice. Although the Affordable Care Act
(ACA) has helped by setting up a market-based system, plans continue to drop out and
eliminate preferred doctors and hospitals from their networks. Even when insurers stay
in a market, they frequently redesign their plans to raise out-of-pocket costs and lower
drug coverage.
Fewer than half of those who purchased individual coverage in 2014 kept the same
plan the following year. In 2018, the situation was complicated by large premium increases
and a mistaken belief that the federal government had fully or partially repealed the ACA. In
addition, the average number of insurance companies selling on the individual marketplace
fell from 5.0 to 3.5.
Cases
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
246 Healthcare in the United States
About one-quarter of low-income adults report that they switched health insurance
coverage in the previous 12 months. Half of them had gaps in coverage, leading to skipped
medications and poorer health outcomes. This is opposite of what the ACA intended; the
law aimed to stabilize healthcare coverage and promote continuous preventive care and
better health.
After Cyndee’s primary care physician left her plan’s network this year, she has
struggled to find a new one. Although she continues to take some of her medications, she
worries that if she goes to a new doctor, she might have to change her medications, or her
medications may not be covered (Hancock 2017).
Discussion Questions
1. Why do you think Cyndee has had to change her health insurance plan so many
times?
2. Why have premiums increased so much?
3. What would you recommend Cyndee do?
References
Abelson, R. 2019. “Employer Health Insurance Is Increasingly Unaffordable, Study Finds.”
New York Times. Published September 25. www.nytimes.com/2019/09/25/health/
employer-health-insurance-cost.html.
Adamczyk, A. 2017. “What Is Single-Payer Healthcare and Why Is It So Popular?” Time.
Published April 13. time.com/money/4733018/what-is-single-payer-healthcaresystem/.
Allen, E. 2016. “Paying the Doctor in 18th-Century Philadelphia.” Library of Congress
Blog. Published April 28. https://blogs.loc.gov/loc/2016/04/paying-the-doctorin-18th-century-philadelphia/.
Alonso-Zaldivar, R. 2017. “Frustration Mounts over Premiums for Affordable Care Act
Individual Health Plans.” Denver Post. Published September 3. www.denverpost.com/
2017/09/03/obamacare-individual-health-plan-premium-increases/.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 247
Amadeo, K. 2018. “Donald Trump on Healthcare: How Trump Is Dismantling
Obamacare.” The Balance. Published January 11. www.thebalance.com/how-couldtrump-change-health-care-in-america-4111422.
America’s Health Insurance Plans (AHIP). 2018. “Where Does Your Premium Dollar Go?”
Published March 2. www.ahip.org/wp-content/uploads/2017/03/HealthCareDollar_
FINAL.pdf.
Beck, M. 2017. “With Direct Primary Care, It’s Just Doctor and Patient.” Wall Street Journal,
February 27.
Belk, D. 2017. “Hidden Costs: A View of Healthcare Costs from the Inside.” The True Cost of
Healthcare. Accessed June 9, 2020. http://truecostofhealthcare.org/introduction/.
Binder, L. 2018. “After Another Merger Monday in Healthcare, CVS Is Still the Company
to Watch in 2018.” Forbes. Published January 23. www.forbes.com/sites/leahbinder/
2018/01/23/after-another-merger-monday-in-health-care-cvs-is-still-the-company-towatch-in-2018/#3dc0be14d7cb.
Blumberg, A., and A. Davidson. 2009. “Accidents of History Created U.S. Health System.”
National Public Radio. Published October 22. www.npr.org/templates/story/story.
php?storyId=114045132.
Bluth, R. 2019. “Surprise Medical Bills Are Driving People into Debt: Will Congress Act to
Stop Them?” National Public Radio. Published May 22. www.npr.org/sections/healthshots/2019/05/22/725796114/surprise-medical-bills-are-driving-people-into-debt-willcongress-act-to-stop-th.
Bomey, N., and E. Weise. 2018. “4 Ways Amazon-Berkshire-JP Morgan Deal Could
Shake Up Healthcare.” USA Today. Published January 30. www.usatoday.com/story/
money/2018/01/30/amazon-berkshire-hathaway-jpmorgan-health-care-deal-couldshake-up-health-care/1078823001/.
Cedars-Sinai. 2017. “Study: Health Insurance Could Be a Matter of Life and Death.”
Cedars-Sinai Blog. Published June 27. https://blog.cedars-sinai.edu/study-healthinsurance-matter-life-death/.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
248 Healthcare in the United States
Centers for Medicare & Medicaid Services (CMS). 2020. “NHE Fact Sheet.” Updated March 24.
www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/
NationalHealthExpendData/NHE-Fact-Sheet.
Colwell, J. 2016. “Concierge Medicine Becomes an Option in Reform Era.” Medical Economics. Published August 10. www.medicaleconomics.com/medical-economics-blog/
concierge-medicine-becomes-option-reform-era.
Consumer Reports. 2019. “Blue Cross and Blue Shield: A Historical Compilation.” Accessed
June 9, 2020. https://advocacy.consumerreports.org/wp-content/uploads/2013/03/
yourhealthdollar.org_blue-cross-history-compilation.pdf.
Cox, C., R. Fehr, and L. Levitt. 2019. “Individual Market Performance in 2018.” Kaiser
Family Foundation. Published May 7. www.kff.org/private-insurance/issue-brief/
individual-insurance-market-performance-in-2018/.
Cubanski, J., W. Koma, A. Damico, and T. Neuman. 2019. “How Much Do Medicare Beneficiaries
Spend Out of Pocket on Health Care?” Kaiser Family Foundation. Published November 4.
www.kff.org/medicare/issue-brief/how-much-do-medicare-beneficiaries-spend-out-ofpocket-on-health-care/.
CVS. 2018. “CVS Health Completes Acquisition of Aetna, Marking the Start of Transforming the Consumer Health Experience.” Published November 28. https://cvshealth.com/
newsroom/press-releases/cvs-health-completes-acquisition-of-aetna-marking-thestart-of-transforming-the-consumer-health-experience.
Foutz, J., E. Squires, R. Garfield, and A. Damico. 2017. The Uninsured: A Primer. Kaiser
Family Foundation. Published December. http://files.kff.org/attachment/Report-TheUninsured-A-Primer-Key-Facts-about-Health-Insurance-and-the-Uninsured-Under-theAffordable-Care-Act.
Fuchs, V. 2018. “Is Single Payer the Answer for the U.S. Healthcare System?” JAMA 319(1):
15–16.
Garfield, R., K. Orgera, and A. Damico. 2019. “The Uninsured and the ACA.” Kaiser Family
Foundation. Published January 25. www.kff.org/report-section/the-uninsured-and-theCopying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 249
aca-a-primer-key-facts-about-health-insurance-and-the-uninsured-amidst-changes-tothe-affordable-care-act-what-are-the-financial-implications-of-lacking-insu/.
Gee, E. 2019. “The High Price of Hospital Care.” Center for American Progress. Published
June 26. www.americanprogress.org/issues/healthcare/reports/2019/06/26/471464/
high-price-hospital-care/.
Goldsmith, J., D. Mosley, and A. Jacobs. 2018. “Medicaid Managed Care: Lots of Unanswered
Questions.” Health Affairs Blog. Published May 3. www.healthaffairs.org/do/10.1377/
hblog20180430.387981/full/.
Goodman, J. 2014. “Everyone Should Have a Concierge Doctor.” Forbes. Published August
28. www.forbes.com/sites/johngoodman/2014/08/28/everyone-should-have-aconcierge-doctor/#612cba3b6323 .
Gruessner, V. 2017. “Humana, Aetna, Cigna Invest in Value-Based Care Payment Models.”
HealthPayer Intelligence. Published January 6. https://healthpayerintelligence.com/
news/humana-aetna-cigna-invest-in-value-based-care-payment-models.
Haberkorn, J. 2010. “Medical Loss Ratios.” Health Policy Brief. Published November 12.
www.healthaffairs.org/do/10.1377/hpb20101112.449011/full/healthpolicybrief_30.pdf.
Haefner, M. 2019. “America’s Largest Health Insurers in 2018.” Becker’s Healthcare. Published January 10. www.beckershospitalreview.com/payer-issues/america-s-largesthealth-insurers-in-2018.html.
Hancock, J. 2017. “Churning, Confusion and Disruption—The Dark Side of Marketplace
Coverage.” Kaiser Health News. Published December 7. https://khn.org/news/
churning-confusion-and-disruption-the-dark-side-of-marketplace-coverage.
HealthCare.gov. 2020a. “Health Insurance: How It Protects You from Health and Financial Risks.” Accessed June 9. www.healthcare.gov/why-coverage-is-important/
coverage-protects-you/.
———. 2020b. “Health Savings Account (HSA).” Accessed June 9. www.healthcare.gov/
glossary/health-savings-account-hsa/.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
250 Healthcare in the United States
HealthInsurance.org. 2020. “ACA’s 2019 Medical Loss Ratio Debates.” Published April 20.
www.healthinsurance.org/obamacare/acas-2019-medical-loss-ratio-rebates/.
Herman, B. 2016. “What, Me Buy Insurance? How the Slow Uptake by ‘Young Invincibles’ Is
Driving the ACA’s Exchange Rates Higher.” Modern Healthcare. Published May 14. www.
modernhealthcare.com/article/20160514/MAGAZINE/305149980.
Hoadley, J., K. Lucia, and M. Kona. 2019. “State Efforts to Protect Consumers from
Balance Billing.” Commonwealth Fund. Published January 19. www.commonwealthfund.
org/blog/2019/state-efforts-protect-consumers-balance-billing.
Hunt, J. 2019. “Average Cost of an ER Visit.” The Balance. Published March 12. www.
thebalance.com/average-cost-of-an-er-visit-4176166.
Kaiser Family Foundation. 2020. “KFF Health Tracking Poll: The Public’s Views on the ACA.”
Published May 27. www.kff.org/interactive/kff-health-tracking-poll-the-publics-viewson-the-aca/#?response=Favorable—Unfavorable&aRange=twoYear.
———. 2019. “Health Insurance Quiz.” Accessed June 9, 2020. www.kff.org/quiz/
health-insurance-quiz/.
———. 2017. “Summary of the Affordable Care Act.” Published March. http://files.kff.org/
attachment/Summary-of-the-Affordable-Care-Act.
———. 2012. “Focus on Health Reform: Health Insurance Market Reforms: Rate
Restrictions.” Kaiser Family Foundation. Published June. www.kff.org/wp-content/
uploads/2013/01/8328.pdf.
Keckley, P. 2017. “The Healthcare System in 2018: Combat Zones to Watch.” The Healthcare
Blog. Published December 29. http://thehealthcareblog.com/blog/2017/12/29/thehealth-care-system-in-2018-combat-zones-to-watch/.
Keith, K. 2019. “Uninsured Rate Rose in 2018, Says Census Bureau Report.” Health
Affairs Blog. Published September 11. www.healthaffairs.org/do/10.1377/
hblog20190911.805983/full/.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 251
Kenen, J. 2017. “The Stealth Repeal of Obamacare.” Politico. Published December 19. www.
politico.com/story/2017/12/19/obamacare-repeal-tax-bill-trump-243912.
Kirzinger, A., C. Muñana, and M. Brodie. 2019. “KFF Health Tracking Poll—July 2019: The
Future of the ACA and Possible Changes to the Current System, Preview of Priorities Heading into 2nd Democratic Debate.” Kaiser Family Foundation. Published July 30. www.kff.
org/health-reform/poll-finding/kff-health-tracking-poll-july-2019/.
Kliff, S. 2019. “A $20,243 Bike Crash: Zuckerberg Hospital’s Aggressive Tactics Leave
Patients with Big Bills.” Vox. Published January 7. www.vox.com/policy-and-politics/
2019/1/7/18137967/er-bills-zuckerberg-san-francisco-general-hospital.
Klinger, L. 2017. “MLR Rebates 2017.” Leavitt Group. Published October 10. https://news.
leavitt.com/health-care-reform/medical-loss-ratio-and-rebates/mlr-rebates-2017/.
Kordonowy, R. 2019. “Reduce Senior Healthcare Costs by Reducing Third-Party Payers.”
Sunshine State News. Published July 24. www.sunshinestatenews.com/story/reducesenior-healthcare-costs-reducing-third-party-payers.
Lawley Insurance. 2015. “Community Rated Versus Experience Rated? What It Means to
Your Business’ Employee Benefits.” Published September 1. www.lawleyinsurance.com/
employee-benefits/community-rated-versus-experience-rated-what-it-means-to-yourbusinesss-employee-benefits/.
Lee, K. J. 2017. “Here’s How to Reduce Healthcare Costs.” Medical Economics. Published
May 9. www.medicaleconomics.com/medical-economics-blog/heres-how-reducehealthcare-costs.
Livingston, S. 2018. “Anthem Makes Changes to Controversial ED Program.” Modern
Healthcare. Published February 15. www.modernhealthcare.com/article/20180215/
NEWS/180219946/anthem-makes-changes-to-controversial-ed-program.
Mankiw, G. 2017. “Why Healthcare Policy Is So Hard.” New York Times. Published July 28.
www.nytimes.com/2017/07/28/upshot/why-health-care-policy-is-so-hard.html.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
252 Healthcare in the United States
Medscape. 2019. “Collecting Effectively from Third-Party Payers and Patients.” Accessed
October 7. www.medscape.com/courses/section/870036.
Merhar, C. 2016. “Fully-Insured vs. Self-Insured (Self-Funded) Health Plans.”
PeopleKeep. Published February 4. www.zanebenefits.com/blog/fully-insured-vsself-insured-self-funded-health-plans.
Meyer, H. 2019. “Kansas Bypasses Obamacare; Will Other States Follow?” Modern Healthcare. Published April 23. www.modernhealthcare.com/insurance/kansas-bypassesobamacare-will-other-states-follow.
Miller, S. 2019. “Small and Midsize Employers Can Contract with Health Providers.” Society
for Human Resource Management. Published May 9. www.shrm.org/resourcesandtools/
hr-topics/benefits/pages/small-midsize-employers-contract-with-health-providers.aspx.
———. 2018. “Employers Hold Down Health Plan Cost for 2019.” Society for Human
Resource Management. Published September 20. www.shrm.org/resourcesandtools/
hr-topics/benefits/pages/employers-hold-down-health-plan-costs-for-2019.aspx.
———. 2017. “2018 FSA Contribution Cap Rises to $2,650.” Society for Human Resource
Management. Published October 23. www.shrm.org/resourcesandtools/hr-topics/
benefits/pages/2018-fsa-contribution-limits.aspx.
Minemyer, P. 2019. “Here’s How the Top Insurers Performed in the 2nd Quarter of 2019.”
Fierce Healthcare. Published August 23. www.fiercehealthcare.com/payer/big-8-
health-insurers-q3-results.
Modern Healthcare. 2019. “Identifying and Addressing Common Medical Billing Errors
Pre- and Post-Payment.” Published August 29. www.modernhealthcare.com/finance/
identifying-addressing-common-medical-billing-errors-pre-post-payment.
Mohamadloo, A., S. Zarein-Dolab, A. Ramezankhani, and J. Jamshid. 2019. “The Main Factors of Induced Demand for Medicine Prescription: A Qualitative Study.” Iranian Journal
of Pharmaceutical Research 18 (1): 479–87.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 253
Norris, L. 2018. “Billions in ACA Rebates Show 80/20 Rule’s Impact.” HealthInsurance.
org. Published January 15. www.healthinsurance.org/obamacare/billions-in-acarebates-show-80-20-rules-impact/.
Olen, H. 2018. “Our Healthcare System Is Still a Mess. Trump Isn’t Doing Anything Serious
About It.” Washington Post. Published January 29. www.washingtonpost.com/blogs/
plum-line/wp/2018/01/29/our-health-care-system-is-still-a-mess-trump-isnt-doinganything-serious-about-it/?utm_term=.0695f7353ef6.
Olivero, M. 2016. “Why Do You Need Health Insurance?” U.S. News & World Report.
Published November 1. https://health.usnews.com/health-care/health-insurance/
articles/2016-11-01/why-do-you-need-health-insurance.
Orszag, P., and E. Emanuel. 2018. “Out-of-Pocket Health Costs Are Rising, but Not That
Much.” Bloomberg News. Published January 4. www.bloomberg.com/view/articles/
2018-01-04/out-of-pocket-health-costs-are-rising-but-not-that-much.
Pennsylvania State University. 2017. “Penn State Selects New Third-Party Administrators
for Healthcare Benefits.” Published August 17. http://news.psu.edu/story/
478022/2017/08/17/administration/penn-state-selects-new-third-party-administratorshealth-care.
Physicians for a National Health Program. 2018. “Beyond the Affordable Care Act: A
Physicians’ Proposal for Single-Payer Healthcare Reform.” Accessed June 11, 2020. www.
pnhp.org/nhi.
Qamar, S. 2014. “Direct Primary Care and Concierge Medicine: They’re Not the Same.”
KevinMD.com. Published August 24. www.kevinmd.com/blog/2014/08/direct-primarycare-concierge-medicine-theyre.html.
Rappleye, E. 2015. “25 Things to Know About Blue Cross Blue Shield.” Becker’s Hospital
Review. Published June 10. www.beckershospitalreview.com/payer-issues/25-things-toknow-about-blue-cross-blue-shield.html.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
254 Healthcare in the United States
Rau, J. 2019. “Nearly Half of Nonprofit Hospital Owners Charge Poor Patients Who Qualify
for Charity Care.” ABC News. Published October 14. https://abcnews.go.com/Health/
half-nonprofit-hospital-owners-charge-poor-patients-qualify/story?id=66261823.
Rosenthal, E. 2017. An American Sickness. New York: Penguin.
Sanicola, L. 2017. “What Is Value-Based Care?” Huffington Post. Published February 2. www.
huffingtonpost.com/entry/what-is-value-based-care_us_58939f9de4b02bbb1816b892.
Santerre, R., and S. Neun. 2012. Health Economics: Theory, Insights, and Industry Analysis,
6th ed. Mason, OH: South-Western/Cengage Learning.
Sawyer, B., and G. Claxton. 2019. “How Do Expenditures Vary Across Populations?”
Peterson-KFF Health System Tracker. Published January 16. www.healthsystemtracker.
org/chart-collection/health-expenditures-vary-across-population/#item-start.
Schwartz, N. 2017. “The Doctor Is In. Co-Pay? $40,000.” New York Times. Published June 3.
www.nytimes.com/2017/06/03/business/economy/high-end-medical-care.html.
Society for Human Resource Management (SHRM). 2017. 2016 Healthcare Benchmarking
Report. Published November. www.shrm.org/hr-today/trends-and-forecasting/researchand-surveys/Documents/2016-Health-Care-Report—All-Industries-All-FTEs.pdf.
Society of Actuaries. 2020. “Be an Actuary.” Accessed June 11. www.beanactuary.org/
what/?fa=fast-facts-about-actuaries.
Teitelbaum, J., and S. Wilensky. 2013. Essentials of Health Policy and Law, 2nd ed. Sudbury,
MA: Jones & Bartlett.
Thimou, T. 2017. “How a Medical Billing Advocate Can Significantly Reduce Your Costs.”
Clark. Published January 31. https://clark.com/insurance/hire-medical-billing-specialistadvocate/.
US Census Bureau. 2018. Health Insurance Coverage in the United States: 2017. Published
September. www.census.gov/content/dam/Census/library/publications/2018/demo/
p60-264.pdf.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use
Chapter 9: Health Insurance 255
Wilensky, G., and L. Rossiter. 1983. “The Relative Importance of Physician-Induced Demand
in the Demand for Medical Care.” Milbank Quarterly 61 (2): 252–77.
Wooldridge, S. 2019. “Stop-Loss Catastrophic Claims Are on the Rise.” Benefits Pro.
Published October 21. www.benefitspro.com/2019/10/21/stop-loss-catastrophic-claimsare-on-the-rise/?slreturn=20191102170951.
Zimlich, R. 2017. “Value-Based Payment Update: Where We Are and Who Is Most Successful.”
Managed Healthcare Executive. November 16. www.managedhealthcareexecutive.com/
benefit-design-and-pricing/value-based-payment-update-where-we-are-and-who-mostsuccessful.
Copying and distribution of this PDF is prohibited without written permission.
For permission, please contact Copyright Clearance Center at www.copyright.com
EBSCOhost – printed on 5/23/2022 12:31 PM via UNIVERSITY OF MARYLAND GLOBAL CAMPUS. All use subject to https://www.ebsco.com/terms-of-use