Health Insurance

In the U.S., insurance involves the payment of a premium (money) in exchange for defense against risk. Health insurance is a specific type of insurance coverage that refers to any program that helps a policyholder pay their medical expenses suffered as the result of injury or illness.

The covered expenses may include surgery or other physician costs, prescription drugs, hospital bills, and dental and vision expenses, although most dental and vision plans are separate plans from medical coverage.

While healthcare insurance may seem commonplace, the truth is that a significant number of U.S. residents fall outside the eligibility parameters to qualify for federal and state-funded health coverage or employer-sponsored health insurance.

This guide provides answers to several common questions about health insurance coverage, free legal advice on topics related to insurance law, and how to find affordable health insurance plans that meet your needs.

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What types of health insurance plans exist in the U.S. market?

Four types of healthcare plans exist in the U.S. marketplace:

• Exclusive Provider Organizations (EPO): a managed care plan that requires plan members to use doctors, hospitals, and specialists within the plan’s network for services, except in the event of an emergency.
• Health Maintenance Organizations (HMO): a health insurance plan that limits plan members to receive services from doctors that contract with the HMO. Plan members may have to live in a particular geographic area and services from non-HMO doctors are only covered in the event of a medical emergency. HMOs integrate patient care and distinguish themselves for their emphasis on preventive care and wellness services.
• Preferred Provider Organizations (PPO): a health plan that encourages plan members to use health providers within its network in exchange for paying a lower fee for those services. PPOs permit plan members to use non-PPO providers but cover their fees at a lower level. Most PPOs require referrals from a primary care doctor before plan members may consult a specialist in the network.
• Point of Service Plans: a traditional health plan that allows plan participants to use the services of any doctor, hospital, specialist, etc. that they want to visit.  In this model, the health plan either pays the provider directly or reimburses the plan member for their medical care fees. Plan members are still required to pay plan deductibles and coinsurance amounts. The services under this model are not bundled. Each service has a fee separate from other services.

Americans looking for the best health insurance plans for their particular situation should investigate the different network options available to them and read insurance company reviews to choose the best one that matches their needs and expectations.

Is all health insurance private?

No. Whether healthcare plans in the U.S. are underwritten by insurers or self-insured, the average person refers to coverage under health plans of all types as “health insurance.”

There are several types of healthcare coverage, including private insurance companies:

• Public, or government-funded programs
• Employer-sponsored group policies
• Union plans
• Nationalized Healthcare

When you’re ready to buy health insurance, the type you choose depends on your individual health needs, where you live, and whether or not qualify for government or employer-sponsored benefits.

Private Health Insurance Companies

Examples of private health insurance are the Blue Cross/Blue Shield and Aetna health plans. Private plans are available as individual policies or in group policies, such as those for employees of an employer-sponsored plan.

Public or Government-Funded Healthcare Programs

In the United States, Medicare is an example of a government-funded healthcare program. Enacted in 1965, Medicare strives to ensure adequate healthcare for U.S. citizens (or legal residents for more than five years) who are over age 65 and have worked a minimum number of quarters in covered employment.

Younger disabled people may also qualify for coverage, as may people with End-Stage Renal Disease. In 2019, 18% of the U.S. population participated in Medicare to the tune of $799 billion in healthcare expenditures.

Medicare enrollees must pay a Part A (hospitalization) monthly premium. Medicare also covers Part D Prescription Drug coverage under a separate monthly premium. Medicare includes physician coverage under Part B without a premium, but with an annual deductible. Traditional Medicare does not include dental or vision coverage for most people.

Medicare is funded through contributions to the Hospital Insurance Trust Fund and the Supplementary Medical Insurance Trust Fund which rely on taxpayer and employer payroll taxes, general revenue, and beneficiary premiums.

Other government health programs include CHIP for children, TRICARE, and VA plans for military personnel.

Employer-Sponsored Healthcare

Some employers prefer to self-insure the medical coverage for their employees. A self-funded, or self-insured, healthcare plan means the employer pays the claims of its employees as they incur them.

In practical terms, the self-funded plan means the employers assume the risk for payment of their employees’ healthcare expenses. Large employers often set up self-insured healthcare programs, including trust funds in which they set aside contributions to pay claims.

Contributions may consist of employer and employee contributions. Self-insured plans usually employ a third-party administrator to process claims.

The fully insured healthcare plan requires the employer to pay a monthly premium to the insurance company in exchange for the insurance company paying the claims of the employer’s employees.

Union Health Insurance Plans

Union plans are plans that provide healthcare for plan members under collective bargaining agreements, such as those designed for the entertainment industry, mine workers, and the construction trades. They are also known as multiemployer plans that receive funding from employers under the terms of their collective bargaining agreements.

Union plans in the broader sense may include health plans for the staff of unions, which may or may not result from collectively bargained agreements.

National Healthcare Programs

In contrast to Medicare in the US, examples of national healthcare are the healthcare programs designed to protect a nation’s citizens against the expenses of healthcare, such as those set up in Canada, and many European countries such as the UK. National Healthcare programs provide “cradle-to-the-grave” free healthcare to their citizens. National healthcare plans are generally funded by the government through some type of tax, or the private sector, or a combination of both, as in Australia’s Medicare program.

What’s the difference between Medicare and Medicaid?

Many people think the terms Medicare and Medicaid are interchangeable, but they are not.

Medicare is the U.S. federal healthcare program for people over age 65 and for certain disabled younger people. Medicare is administered by the Centers for Medicare and Medicaid Services (CMS).

CMS often contracts with private insurance companies, such as one of the independent Blue Cross/Blue Shield companies, to function as the intermediary in the administration of claims under Medicare.

On the other hand, Medicaid is a health program for low-income families with dependent children, elderly people, and disabled people who receive supplemental income payments through Social Security.

Unlike Medicare, Medicaid is administered by each state and the states can set their own eligibility requirements as long as they comply with federal guidelines. ACA expanded the groups eligible for Medicaid but not all states opted into the Medicaid expansion.

Are health plans covered by federal laws in the U.S.?

Health plans sponsored by employers and plan sponsors (such as member organizations) are subject to the laws set out in the:

• Employee Retirement Income Security Act of 1974 (ERISA),
• Internal Revenue Code and its regulations,
• US Department of Labor regulations,
• Consolidated Omnibus Budget Reconciliation Act (COBRA),
• Patient Protection and Affordable Care Act (ACA),
• Health Insurance Portability and Accountability Act (HIPAA), and
• Health Information Technology for Economic and Clinical Health Act (HITECH).

Scroll through to learn more about the federal laws that govern U.S. health insurance plans.

What is ERISA?

With respect to health plans, the Employee Retirement Income Security Act of 1974 (ERISA) governs many of the features of the benefits provided under health plans sponsored by employers and plan sponsors in the private sector. ERISA applies to group health plans, both insured and self-funded plans. ERISA does not apply to state and local government plans or church plans.

ERISA covers standards for the following health benefit plan features:

• Benefit plan Information disclosure to employees through a Summary Plan Descriptions
• Minimum standards for group health and welfare benefit plans
• Claims processing requirements, and
• Appeal procedures when a plan sponsor denies a claim.

ERISA applies to the following employer health coverages:

• Health Savings Accounts (HSAs) funded by pre-tax contributions
• Flexible Spending Accounts (FSAs)
• Dental and Vision Plans
• Disability Insurance
• Prescription Drug plans
• Long-term Care Insurance.

ERISA does not apply to sick pay plans, short-term disability, or medical leave plans whose benefits are:

• Paid to individuals,
• Not funded by employee contributions,
• Paid out as normal payroll practice, or
• Not funded by pre-funded accounts or insurance policies.

ERISA also does not apply to voluntary employee group insurance plans solely funded by employee contributions that the employer deducts from payroll to pay premiums to insurers, and where the employer does not sponsor or make plan contributions.

What is COBRA?

COBRA is the acronym for the Consolidated Omnibus Budget Reconciliation Act of 1985. COBRA amended ERISA, the Internal Revenue Code, and the Public Health Service Act so that individuals covered under group health plans may also apply to temporarily continue coverage after circumstances that would normally terminate health coverage.

COBRA and health coverage qualifying events include those that impact your employment status, including marriage, divorce, birth, and adoption. Qualifying events can vary based on your insurance provider, policy, and state laws.

COBRA applies to health plans of employers with 20 or more employees in a plan year. The law applies to health plans in the private sector and government plans maintained by local and state governments. COBRA does not apply to plans maintained by the U.S. government or certain church plans.

COBRA permits former employees, spouses, retirees, and dependent children to continue health coverage at the group health plan’s negotiated COBRA rates. COBRA rates are usually more expensive than rates for active employees, but less expensive than private plan rates.

Employees who qualify for COBRA coverage are those who:

• Quit,
• Have their hours reduced below the level that qualifies them for health coverage,
• Retire,
• Are laid off, or
• Are fired for something other than gross negligence.

In the above circumstances, employees may elect to continue coverage for up to 18 months under the group health plan as long as they pay the full COBRA premium.

An employee’s spouse and dependent children have an independent right to elect to continue group health plan coverage under COBRA for up to 36 months from the date they lose health coverage due to:

• Divorce or legal separation;
• The employee’s death;
• The employee’s loss of coverage due to a qualifying event;
• The employee’s eligibility for Medicare; or
• The dependent becomes ineligible for health coverage under the plan.

If an employee dies within the COBRA extended coverage period, the surviving spouse and dependent children are extended for another 36 months of COBRA health coverage.

COBRA may also provide up to 29 months of extended health coverage if an employee receiving COBRA benefits becomes disabled and meets certain requirements.

What is HIPAA?

Congress passed the Health Insurance Portability and Accountability Act (HIPAA) in 1996 which became part of the Social Security Act. HIPAA requires data safety compliance in three key areas:

• Administration
• Physical data security
• Technical security.

The most common HIPAA violations that result in substantial financial penalties are failure to:

• Carry out risk analysis on a company-wide basis to determine confidentiality, integrity, and availability of Personal Health Information (PHI);
• Enter into third-party agreements that comply with HIPAA requirements;
• Comply with non-disclosures of PHI;
• Notify of HIPAA breaches or delayed notices of a breach;
• Keep PHI safe;
• Restrict access to PHI to someone as required by HIPAA’s privacy rule.

The OCR fined the University of California Los Angeles Health System $865,000 for failure to restrict access to patients’ PHI. The physician who accessed the PHI without authorization spent four months in federal prison for multiple offenses.

The Department of Health and Human Services (DHS) Office for Civil Rights (OCR) pursues settlements of grievous HIPAA violations. The OCR also pursues common HIPAA violations to underscore the importance of compliance with particular rules.

Do cybercriminals’ data breaches contravene HIPAA?

Yes, if the breaches are at an intolerable level. Data breaches are a daily occurrence in today’s digital world. The intent of HIPAA’s security rules is not to hold plan sponsors to an impossible standard of never experiencing a data breach. HIPAA compliance requires companies to reduce the risk of data breaches to tolerable levels.

Data breaches often take years to identify which means they may compound during that time. OCR may identify HIPAA violations during investigations:

• By OCR or state attorney generals;
• Responding to complaints received about businesses, individuals in the business, or third-party associates of a business; or
• Related to HIPAA compliance audits.

Systematic HIPAA compliance reviews conducted at regular intervals are a preventative measure that may prove helpful in reducing data breach penalties.

OCR investigates data breaches that often close without a finding of a HIPAA violation.

What is the HITECH Act?

The Health Information Technology for Economic and Clinical Health Act passed into law in 2009 as part of the American Recovery and Reinvestment Act. HITECH encouraged the adoption and use of electronic health information technological tools. The provisions of HITECH apply to organizations covered under the act as well as business associates, software developers, and health device vendors.

HITECH provided financial motivations for organizations to adopt Electronic Health Records (EHR) at the same time that it increased the penalties for HIPAA’s privacy and security rules. HITECH the Department of Health and Human Services the ability to advance healthcare, safety, quality, and efficiency of information through EHRs.

What is the Affordable Care Act?

In 2010, the U.S. Congress passed the Affordable Care Act (ACA) that requires most American citizens to apply for and maintain health care coverage. ACA also changed the rules so that insurance companies could no longer deny coverage based on pre-existing health conditions, claims history, or health status. This change positively impacted the ability of people suffering from cancer, heart conditions, or diabetes, to obtain health coverage from insurers.

The ACA created what are known as health insurance exchanges, where people looking for health care coverage could easily compare coverages offered by the policies of various insurance carriers. The health care exchanges assist Americans without employer-sponsored health plans to find the best health insurance rates given their health issues and the mandates of their pocketbook. The ACA requires that health benefits packages satisfy minimum essential health coverage requirements. Health plans must also provide coverage to an employee’s dependent children up to age 26.

Medium and large-size employers who violate ACA’s requirements face severe penalties. For example, employers of 50 or more employees must provide health coverage to 95% of their full-time employees or face $3,860 (in 2020) in fines per employee. On the other hand, ACA does not provide a right for employees to demand an employer provide health coverage.

The ACA remained a controversial piece of legislation and was under judicial review by the U.S. Supreme Court (SCOTUS) based on the claims by various states that the ACA is unconstitutional. On June 17, 2021, SCOTUS issued its 7-2 opinion, effectively overturning the lower court’s ruling that the law is unconstitutional. Justice Breyer’s opinion held that the state claimants had no standing to sue. For the third time, the ACA stands.

Are employers with less than 50 employees covered by ACA?

Small employers with less than 50 full-time employees are not required to comply with ACA’s provisions. Small employers often provide health care coverage to their employees on a voluntary basis. They must also provide coverage for employees who are covered under an employment contract that requires the provision of health coverage.

If you have any questions regarding your health insurance coverage or health insurance laws in the United States, enter your ZIP code below to get in touch with a local insurance lawyer today.

Health Insurance: Commonly Used Terms

Many terms have distinct meanings in the health plan universe. A few of the more common terms are set out below:

• Deductible: the amount plan members must pay before the plan will pay its share of the claim’s expenses.
• Coinsurance (or co-pay): a fixed amount that plan members must pay for services covered under an insurance plan. This may be a flat dollar amount per service or a percentage of the cost.
• Out-of-Pocket expenses: the costs plan members must pay for medical care, which includes deductibles, coinsurance, and copay amounts after which the insurance company pays 100% of the expenses.
• Annual Maximum: the maximum dollar amount a health plan will pay for specific coverages in a specified time frame, such as a plan year or calendar year.
• Lifetime Maximum: the maximum dollar amount a health plan will pay on behalf of plan members for covered services over their lifetime. After September 23, 2010, the ACA required all plans to remove lifetime maximums.
• Coverage Limitations: This refers to the restrictions that health plans apply to specific coverages, such as orthodonture up to age 19.
• Supplemental Health Insurance: covers the out-of-pocket and cost-sharing expenses that a primary health insurance policy does not cover, including the deductible, co-pays, and co-insurance amounts.  Supplemental health insurance policies often cover dental and vision expenses that the primary plan excludes from covered expenses Medicare beneficiaries often have a supplemental health insurance policy to cover expenses that Medicare does not cover.

Case Studies: Health Insurance

Case Study 1: Types of Health Insurance Plans

Health insurance plans come in various types, each with its own features and coverage options. Understanding these options is crucial for individuals seeking the right coverage for their needs. We will delve into the four primary types of health insurance plans available in the U.S. market and explore how they differ to help readers make informed decisions.

Case Study 2: ERISA and COBRA

ERISA (Employee Retirement Income Security Act) and COBRA (Consolidated Omnibus Budget Reconciliation Act) are federal laws that impact health insurance coverage in certain situations. We will examine how ERISA governs employer-sponsored health plans, including the standards for benefits and participant rights.

Additionally, we will explore how COBRA provides temporary continuation of health coverage after qualifying events, such as job loss or divorce.

Case Study 3: HIPAA, HITECH, and ACA

HIPAA (Health Insurance Portability and Accountability Act), HITECH (Health Information Technology for Economic and Clinical Health Act), and ACA (Affordable Care Act) are significant federal laws that influence health insurance coverage and data privacy.

We will discuss the key provisions of these laws, including protections for patient health information, regulations for electronic health records, and the impact of the ACA on insurance coverage requirements.