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Financing Healthcare (Part 1) Lecture D
- 1. Introduction to HealthCare and Public Health in the U.S. Financing Health Care, Part 1 Lecture d This material (Comp 1 Unit 4) was developed by Oregon Health & Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number 90WT0001. This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by-nc-sa/4.0/.
- 2. Financing Health Care,Part 1 Learning Objectives - 1 • Describe the history and role of the health insurance industry in financing health care in the United States, and Federal laws that have influenced the development of the industry. (Lecture a) • Explain the importance of the health care industry in the U.S. economy and the role of financial management in health care. (Lecture b) 2
- 3. Financing Health Care,Part 1 Learning Objectives - 2 • Describe models of health care financing in the U.S. and in selected other countries. (Lecture c) • Explain the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs. (Lecture d) 3
- 4. Financing Health Care,Part 1 Learning Objectives - 3 • Describe the various roles played by government as policy maker, payor, provider, and regulator of health care. (Lecture d) • Describe the organization and function of Medicare and Medicaid. (Lecture e) 4
- 5. Health Insurance inthe U.S. - 1 • How does health insurance work • How insurers pay health care providers • Sources of health care funding • Who can offer health insurance • Types of health insurance plans • Managed care • How laws regulate private insurance 5
- 6. Health Insurance • Spreadsrisk over a large pool of people – 5% of people account for about 50% of spending • Cost influenced by: – Prescription costs – Technology – Aging population – Chronic conditions – Government subsidies – Administrative costs 6
- 7. How Insurers PayProviders - 1 • Provider submits claim – Uses two kinds of codes o Diagnosis code = ICD-10-CM o Procedure code = CPT code or DRG code • Medical claims examiner or adjuster processes claim – Determines “usual and customary” charge o Deducts portion patient is responsible for o Deducts contractual provider discount o Reimburses remainder 7
- 8. How Insurers PayProviders - 2 • Patient and provider receive explanation of benefits (EOB), also called remittance advice (RA), from payor • Claim can be denied for many reasons: – Coding errors – Insufficient information – Procedure considered experimental or otherwise not covered by the policy • Rejected claims can be appealed 8
- 9. The Multi-payor U.S. HealthCare System • Contributors – Private sources o Employers and employees Contributions to private health insurance Out of pocket – Public or government sources o Federal, State, and local Payroll and general tax revenues Special tax, e.g. sales tax Pooled into large funds 9
- 10. Public vs. PrivateInsurance • Public – Government run – Medicare – Medicaid – Children’s Health Insurance Program (CHIP) • Private – Individual organizations – State-licensed companies – Self-insured employer plan o ERISA regulates o Third-party administrator 10
- 11. Types of PrivateHealth Insurance • Indemnity plans - “traditional” plans – Fee for service – Simply provide reimbursement to providers – Less prevalent today • Managed care plans – Offer financial incentives to providers and patients – Integrate financing and delivery of care within a single system 11
- 12. Blue Cross/Blue Shield •Independent, state-licensed organizations • Blue Cross reimburses hospitals • Blue Shield reimburses physicians • Historically set up as not-for-profits under special state laws • Today, some organizations operate as commercial insurers 12
- 13. The Managed CareBusiness Model • Integrates financing and delivery using managed care techniques – Provider reimbursement – Comprehensive quality medical care • Features: – Controlled access to comprehensive care – Reduce costs – Improving quality care • Rationing and quality of care concerns 13
- 14. MCO Models • HealthMaintenance Organization (HMO) – Prototype MCO • Newer MCOs – Preferred Provider Organization (PPO) – Exclusive Provider Organization (EPO) – Point of Service Plan (POS) • Newer MCOs Use: – Mix and match reimbursement methodologies – Greater patient choice – Increased costs 14
- 15. The “Managed” inManaged Care • Managed care – Accessibility – Controls costs o Patient and provider incentives – Utilization review o Determine medical necessity of care o Role as gatekeeper – Different types of managed care plans o Plan differences based upon cost and provider choice 15
- 16. Cost vs. ProviderChoice • Various plans are defined by choices in what providers the patient can use • Fewer choices = lower premiums and out- of-pocket costs • Types of plans: – Health maintenance organization (HMO) – Preferred provider organization (PPO) o Exclusive Provider Organization (EPO) – Point-of-service plan (POS) 16
- 17. HMO Models • Lowestcost • Various types: – Staff model – Group model – Open-group model – Independent physician association (IPA) – Network model – Mixed model • Reimbursement to HMO providers only 17
- 18. Preferred Provider Organization (PPO) •Any provider – In-network providers o Lower deductibles, copayments, and coinsurance – Out-of-network providers o Higher deductibles and coinsurance for the patient • EPO – Must use in-network providers – No reimbursement for out of network provider services • No gatekeeper for either a PPO or EPO 18
- 19. Point of ServicePlan (POS) • Gatekeeper – All services through primary care physician – Controls access to all medical services – Referrals generally to in-network providers only – May refer out-of-network • No reimbursement for services to out-of- network providers unless previously authorized by gatekeeper 19
- 20. Indemnity vs. Managed CarePrograms 4.9 Table: (2011, CC BY-NC-SA 3.0). 20
- 21. Regulation of Private HealthInsurance • States control the legal structure and monitor their finances – Ensure the company can meet its obligations • Private insurance companies are also regulated by federal laws 21
- 22. Federal Regulation ofPrivate Health Insurance - 1 • Employee Retirement Income Security Act (ERISA) 1974 – Permits and regulates self-insured health plans o Does not require employer plan o Requires plans to meet minimum standards o Requires a grievance and appeals process o Gives participants the right to sue for benefits 22
- 23. Federal Regulation ofPrivate Health Insurance - 2 • Consolidated Omnibus Budget Reconciliation Act (COBRA) 1985 – Amendment to ERISA – Allows continuation of group benefits in certain cases o Voluntary or involuntary job loss o Reduction in hours worked o Transition between jobs o Death of a spouse, divorce, and certain other life events – Individuals may have to pay higher premiums – Not required for companies with >20 employees 23
- 24. Federal Regulation ofPrivate Health Insurance - 3 • Health Insurance Portability and Accountability Act (HIPAA) 1996 – Amendment to ERISA – Defines “protected health information” and helps ensure its privacy – Protects participants in group health plans 24
- 25. Federal Regulation ofPrivate Health Insurance - 4 • ERISA mandated coverage – Newborns' and Mothers' Health Protection Act 1996 o 48-hour hospital stay following childbirth – Mental Health Parity Act 1996 o Requires equality for coverage of mental illness – Women's Health and Cancer Rights Act 1997 o Provides certain post-mastectomy benefits 25
- 26. Federal Regulation ofPrivate Health Insurance - 5 • Patient Protection and Affordable Care Act (PPACA), or Affordable Care Act (ACA) of 2010 – Ends lifetime limits and most annual limits on care – Provides free access to preventive services – 50% discount on brand-name drugs on Medicare – No limit or denial for children under 19 with preexisting conditions – Adults no longer denied due to preexisting condition – Allows children under 26 to stay on parent’s plan 26
- 27. Financing Health Care,Part 1 Summary – 1 – Lecture d • Insurance works by spreading financial risk • Insurers pay providers based upon – Diagnosis and procedure codes – Contracted rates 27
- 28. Financing Health Care,Part 1 Summary – 2 – Lecture d • States license and regulate private insurance – Types of plans include indemnity, Blue Cross and Blue Shield and managed care plans – Managed care uses techniques that result in lower health care costs and improved quality • Some Federal laws regulate private health insurance – ERISA, COBRA, HIPAA, and the Affordable Care Act 28
- 29. Financing Health Care,Part 1 References – 1 – Lecture d References American Association of Preferred Provider Organizations. Resources. http://aappo.interactivemedialab.com/Resources.aspx. Accessed January 23, 2017. American Association of Preferred Provider Organizations. PPO Toolkit. http://aappo.interactivemedialab.com/Portals/0/Documents/PPO%20Toolkit.pdf. Accessed January 23, 2017. Bihari M. Understanding the Medicare Part D donut hole: learn about the Medicare Part D coverage gap. http://healthinsurance.about.com/od/medicare/a/understanding_part_d.htm. Updated October 6, 2016. Accessed January 23, 2017. Centers for Medicare and Medicaid Services. Children’s Health Insurance Program (CHIP). https://www.cms.gov/Outreach-and-Education/American-Indian-Alaska- Native/AIAN/CHIP-Grantees/Overview.html. Accessed January 23, 2017. Centers for Medicare and Medicaid Services. http://www.cms.gov. Accessed January 23, 2017. 29
- 30. Financing Health Care,Part 1 References – 2 – Lecture d References Congressional Budget Office. Testimony on CBO’s analysis of the major health care legislation enacted in March 2010, Committee on Energy and Commerce, U.S. House of Representatives. March 30, 2011. https://www.cbo.gov/publication/22077?index=12119. Accessed January 23, 2017. Cornell University Law School. Workers’ Compensation: an overview. http://topics.law.cornell.edu/wex/Workers_compensation. Accessed January 23, 2017. Department of Labor. Employee Retirement Income Security Act (ERISA) plan information. http://www.dol.gov/general/topic/health-plans/erisa. Accessed January 23, 2017. Health and Human Services. Summary of the HIPAA security rule. http://www.hhs.gov/hipaa/for-professionals/security/laws-regulations/. Accessed January 23, 2017. Kaiser Family Foundation. The Facts on Medicare Spending and Financing. 2015. http://kff.org/medicare/fact-sheet/medicare-spending-and-financing-fact-sheet/. Accessed January 23, 2017. 30
- 31. Financing Health Care,Part 1 References – 3 – Lecture d References Levey NM. Questions and answers about new rules on appealing rejections of health insurance claims. Los Angeles Times. July 22, 2010. http://articles.latimes.com/2010/jul/22/nation/la-na-health-rules-qa-20100723. Accessed January 23, 2017. Marcinko DE. Understanding the Medicare Prospective Payment System. September 17, 2009. http://medicalexecutivepost.com/2009/09/17/understanding-the-medicare- prospective-payment-system. Accessed January 23, 2017. MCOL. Managed care fact sheets. http://www.mcol.com/factsheetindex. Accessed January 23, 2017. Medicare.gov. How do Medicare advantage plans work? https://www.medicare.gov/sign- up-change-plans/medicare-health-plans/medicare-advantage-plans/how-medicare- advantage-plans-work.html. Accessed January 23, 2017. National Association of Workers’ Compensation Judiciary. http://www.nawcj.org. Accessed January 23, 2017. National Bureau of Economic Research. Prospective Payment System (PPS) data. http://www.nber.org/data/pps.html. Accessed January 23, 2017. 31
- 32. Financing Health Care,Part 1 References – 4 – Lecture d References Obringer LA, Jeffries M. Understanding Health Insurance. http://health.howstuffworks.com/medicine/healthcare/insurance/health-insurance.htm. Accessed January 23, 2017. U.S. Department of Health and Human Services and U.S. Department of Justice. Stop Medicare Fraud. http://www.stopmedicarefraud.gov. Accessed January 23, 2017. U.S. Department of Labor. Health Plans & Benefits. http://www.dol.gov/dol/topic/health- plans. Accessed January 23, 2017. U.S. Department of Labor. Workers’ Compensation. http://www.dol.gov/dol/topic/workcomp/index.htm. Accessed January 23, 2017. WorkersCompensation.com. http://www.workerscompensation.com. Accessed January 23, 2017. Charts, Tables, Figures 4.9 Table: Indemnity vs. Managed Care Programs (2011, CC BY-NC-SA 3.0). 32
- 33. Introduction to HealthCare and Public Health in the U.S. Financing Health Care, Part 1 Lecture d This material was developed by Oregon Health & Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number 90WT0001. 33
Editor's Notes
- #2 Welcome to Introduction to Health Care and Public Health in the U.S., Financing Health Care, Part 1. This is lecture d. The component, Introduction to Health Care and Public Health in the U.S., is a survey of how health care and public health are organized and how services are delivered in the U.S. It covers public policy, relevant organizations and their interrelationships, professional roles, legal and regulatory issues, and payment systems. It also addresses health reform initiatives in the U.S.
- #3 The objectives for Financing Health Care, Part 1 are: Describe the history and role of the health insurance industry in financing health care in the U.S., and Federal laws that have influenced the development of the industry; Explain the importance of the health care industry in the U.S. economy and the role of financial management in health care;
- #4 Describe the models of health care financing found in the U.S. and in selected other countries; Explain the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs;
- #5 Describe the various roles played by government as policy maker, payor, provider, and regulator of health care And describe the organization and function of Medicare and Medicaid
- #6 This lecture discusses payors in the U.S. health care system. It describes how health insurance works and how insurers pay health care providers for their services. It covers the two sources for health care financing, who is allowed to offer insurance, and the different types of health insurance plans. It also introduces the concept of managed care, the types of managed care plans, and how managed care affects and controls insurance costs. Finally, this lecture describes the role of state and federal laws in regulating private health insurance companies.
- #7 Health insurance spreads the financial risk for health care expenditures for a group of people by pooling money or premiums paid on their behalf into a larger fund. A payor uses the pool of money to pay or reimburse for health care services provided to the individual members of the group. In a given year, approximately five percent of the people enrolled in a health insurance plan consume about half of all the money available in the pool. Health plans stay solvent in most cases because each year all of its members contribute more money than they use. The cost of health insurance is influenced most by prescription costs, technology, an aging population, the prevalence of chronic conditions, government subsidies, and health plan administrative costs.
- #8 It is important to understand how providers receive payment from payors or insurance companies. Whenever a patient sees a doctor, has a medical test, or goes to the hospital, the provider prepares one or more claims to receive insurance reimbursement. Information about the patient and the services received is described in two kinds of code – a diagnosis code and a procedure code. A diagnosis code is called an ICD-10-CM code. ICD stands for International Classification of Disease. CM stands for Clinical Modification, and ICD-10-CM codes are used only in clinical and outpatient settings. A procedure code is called a CPT code, which stands for Current Procedural Terminology, in the case of physicians, or a DRG, diagnosis related group, in the case of hospitals billing Medicare. The procedure code describes the services provided by the provider. Most claims are sent electronically to the insurance company, where the medical claims examiner or adjuster processes it according to the insurance plan’s guidelines. The examiner subtracts from the bill any amount considered in excess of the plan’s so-called usual and customary charge. The examiner also subtracts any patient co-payment, co-insurance, or deductible, as well as the provider’s pre-negotiated discount for services. The balance is then remitted to the provider in an explanation of benefits or remittance advice.
- #9 An explanation of benefits, or EOB, also known as a remittance advice, or RA, is a document issued by the payor stating the status of the claim and whether it is paid, suspended or pending, rejected, or denied. The purpose is to provide detailed payment information relative to the claim and, if applicable, to describe why the total original charges have not been paid in full. If a claim is rejected, the reason must be stated in the explanation of benefits or remittance advice. Claims can be denied because of coding errors or insufficient information, because a service is not covered under the policy, or because a procedure is still considered experimental. Many employer-provided insurance plans have a process for allowing patients to appeal a rejected claim. Under the recent health care reform law, more companies are required to establish this process, as well as allow patients to have a rejected claim reviewed by an independent third party.
- #10 As mentioned previously, contributors to health care financing include private and public or government sources. Private sources include employers who purchase insurance policies or pay directly for health care expenditures through a self-insured plan. Individuals and families contribute through the employee portion of health insurance premiums and through out-of-pocket expenses. Federal, state, and local governments collect payroll taxes from employers and employees, and general tax revenue that are used to fund government-financed insurance. Occasionally special tax methods are used, such as a sales tax. The money contributed from government and private sources is pooled into larger funds and distributed by payors. Payor was previously defined as a pool of funds, without reference to any specific payor. The next slides will expand this definition to include different organizations or plans that pay for the health care services either through a private health insurance plan or through a government insurance program. Each insurance pool or fund pays or reimburses on behalf of the individuals who meet the eligibility requirements for the group represented by the plan or program. For example, eligibility may be due to age, as in Medicare or the Children’s Health Insurance Program, or CHIP; socioeconomic category as in Medicaid; or employment status for a large corporation that self-insures.
- #11 The two basic types of health insurance are public and private with the difference being who is responsible for the programs. Public insurance is run by the federal government, state government, or both, meaning the government provides the coverage and pays the providers. Medicare is for people age 65 and older and for people with certain disabilities. Medicaid is for low-income people. CHIP provides low-cost health insurance coverage to children in families that earn too much qualify for Medicaid but cannot afford private health insurance. Medicaid and CHIP receive federal funding, but are administered by the states. Private health insurance is funded and run by individual organizations that are licensed by a state. Consumers usually obtain private insurance through their employer. In some cases, employers self-insure, in which case they finance and pay for all the health care expenditures of their employees. These plans use the guidelines in the Employee Retirement Income Security Act or ERISA legislation, which is discussed later in this lecture. In these plans, the employer administers the plan and assumes all the risk for the health care expenditures of its employees. An employer may contract the claims paperwork to a third-party administrator, or TPA. The remainder of this lecture will focus on private health insurance. Government health insurance will be covered in the next lecture.
- #12 The contract that an insurance company offers is either an indemnity plan or a managed care plan. Generally, the contract for insurance is between the individual or family and the insurance company or payor, but not between the insurance company and provider. There are two types of private health insurance plans. Indemnity plans are “traditional” plans based on a fee-for-service model. Under these plans, providers are paid according to the services they perform. For example, if you break your arm, the company pays a different fee for each service provided, such as a fee for the x-ray and a fee for applying a cast. Today, relatively few indemnity plans exist. Instead, most health plans are managed care plans. Managed care is a term used to describe the techniques designed to provide comprehensive health care, manage outcomes and quality, and control costs through a managed care organization. Managed care became popular in the 1970s with health maintenance organizations, or HMOs. Managed care controls costs by providing financial incentives to providers and patients. A key difference between the two types of plans is indemnity plans simply finance health care by paying reimbursements to providers. In contrast, managed care plans integrate the financing and delivery of care into one system. The current delivery of "managed care" services is considerably different than the HMO models of the 1970s, 80s, and 90s.
- #13 Before continuing the discussion of managed care, Blue Cross Blue Shield is a special case that deserves separate mention. It is a collection of private insurance organizations, each of which is independent and licensed by a state. Blue Cross reimburses hospitals and Blue Shield reimburses physicians, but the two organizations function as a whole. Historically, Blue Cross Blue Shield consisted of not-for-profit associations organized to circumvent state insurance licensing requirements. Today, some Blue Cross Blue Shield organizations operate as commercial for-profit insurance companies.
- #14 A managed care organization, or MCO, is a business model that integrates financing and delivery of health care, using managed care techniques. Managed care can be separated into two distinct functions: one is the methodology and techniques used for provider reimbursement, and the other is the provision of comprehensive quality medical care. Managed care organizations share common features. All have controlled access to comprehensive care and manage the care provided using various techniques designed to reduce costs yet improve the quality of care. Patient concerns about rationing and the quality of care received through withholding of services by early health maintenance organizations resulted in new managed care models.
- #15 HMO plans were the prototype MCOs, and provided care to members during sickness, and encouraged prevention and wellness. Original HMOs used an episode of care reimbursement methodology called capitation, and limited member access only to designated plan providers. The newer models of MCOs listed on this slide developed as concerns grew that care was being withheld at the expense of patients. The new models mixed-and-matched reimbursement methodologies, permitting greater patient choice of providers, but increased the cost of care from the original HMO model. These four MCO models will be discussed in more detail later in this lecture.
- #16 Managed care “manages” the accessibility, cost, and quality of health care. Managed care plans control what contracted providers are paid and use cost-containment strategies, such as incentives for physicians and patients to choose less costly forms of care, and utilization reviews to determine the medical necessity of services. For these reasons, many people consider managed care to be a gatekeeper. Today, many versions of managed care plans exist, their differences are based primarily on cost and provider choice.
- #17 Managed care plans differ with regard to the number of choices its members have, which has a direct relationship to health care costs. Fewer choices, usually in the form of restricting a patient’s selection of health care providers, translates to lower insurance premiums and lower out-of-pocket costs. However, some people prefer the freedom to choose their own doctors. This choice, and the additional costs involved, is an important issue. There are three types of managed care plans: health maintenance organizations, or HMOs; preferred provider organizations, or PPOs; and point-of-service plans, or POSs. A variation of the PPO is the exclusive provider organization or EPO. The next slides will detail the varying degrees of choice and cost in each of these models.
- #18 HMOs represent the lowest cost managed care organization. There are various types of HMOs, with the differences depending mainly on the working arrangement providers have with the organization. In a staff model HMO, the physicians are salaried employees. They see only patients who are enrolled in that HMO, and they see patients in a clinic operated by the HMO. In a group model HMO, the physicians are employed by an independent, physician-owned group practice, and the HMO contracts with them for services. In this arrangement, HMO patients are the bulk of a physician’s business, and again, patients are seen in a clinic run by the HMO. In an open-group HMO, the organization contracts with individual physicians, who are free to contract with multiple plans. Patients are often seen in a clinic operated by the HMO. In an independent physician association, or IPA, the HMO contracts with physicians who are organized into a group such as a corporation, partnership, or foundation. The physicians retain their independence to see other patients, and they see patients in their own offices, not a clinic operated by the HMO. The IPA model is now used in the majority of HMO plans. In a network model, the HMO contracts with multiple independent physicians, group practices, and/or IPAs. In a mixed model, the HMO is a mix and match of any of the above models. Reimbursement is made only to providers within the HMO. No reimbursement is available for health care services from providers outside the HMO.
- #19 In a PPO, reimbursement is provided using a fee-for-service methodology where patients receive discounts and savings for using in-network providers. PPOs feature lower deductibles, copayments, and coinsurance. In a PPO, a patient is free to seek care from any provider they choose and will still receive some reimbursement. A variation of the PPO is the exclusive provider organization, or EPO. It is similar to a PPO, but care must be obtained through in-network providers only. Health care services supplied by providers outside the network are not reimbursable through the EPO. In both the PPO and EPO plans, no gatekeeper controls access to medical services and individuals may seek care from any provider.
- #20 The point of service plan, or POS, includes a primary care physician, or gatekeeper, who controls access to plan-only providers, similar to an HMO. The primary care physician becomes the point of service for delivery of all health care services. In a POS plan, referrals can be made out of network at the discretion of the primary care physician.
- #21 This table summarizes and compares indemnity and managed care programs. Indemnity programs have the most freedom of choice, but they cost the most. HMOs have the least freedom of choice and cost the least. As previously mentioned, all managed care plans limit member choice by designating a network of providers. The providers accept reduced reimbursement from the managed care program in exchange for patients referred through the plan. PPOs offer a broader network than HMOs do. So-called in-network providers are reimbursed more by the insurance plan than out-of-network providers. A patient might pay as much as forty percent more for out-of-network services. Choice of physicians is most limited with an HMO, which also requires the patient to designate a primary care provider, or PCP. Patients must see this provider first, in order to get a referral to a specialist. PPOs and EPOs do not have this requirement. HMOs require precertification, a process for checking the patient’s eligibility and authorizing a medical procedure or hospitalization before it occurs. If precertification is skipped, the HMO may not pay for the patient’s care. The exception is in the case of an emergency, but even then, the incident must be certified as necessary after the fact. PPOs do not usually require certification. Another difference between HMOs and PPOs is that HMOs generally pay more for preventive care, which lowers costs for everyone. Note that a POS plan is a hybrid. It has the flexibility of a PPO, with a cost comparable to an HMO. A POS relies heavily on preventive care. Members have a primary care physician who may refer them to providers outside the network if deemed necessary.
- #22 Private insurance is regulated by both state and federal laws. States regulate commercial health insurers. They control the legal structure of private insurers and monitor their finances to make sure they can meet their obligations to the people they insure. Companies must prove they have enough money to pay all anticipated claims for the year, along with their administrative and operating costs, and they must maintain a certain amount of excess funds or reserves, in case claims exceed projected experience.
- #23 There are multiple Federal laws regulating both public and private health insurance. Many of the laws have been mentioned previously. One of the most important federal laws about regulation of private insurance is the Employee Retirement Income Security Act of 1974 or ERISA. It sets certain minimum standards for employer-provided health plans. It allows employers to self-insure, effectively permitting an employer to create an insurance company, bypassing state requirements. For any ERISA-organized health plan, states laws may not pre-empt Federal rules and regulations. It requires that employers provide an appeals process so employees can get benefits, and it allows employees to sue for benefits.
- #24 COBRA is an amendment to ERISA that allows employees to continue their health care insurance in certain cases, such as voluntarily leaving a job, involuntary job loss, death of a spouse, and divorce. Individuals usually have to pay at least some of the premium themselves, and they may even pay slightly more than what the insurance formerly cost. Companies with fewer than twenty employees are not generally required to offer COBRA benefits.
- #25 Most people are familiar with HIPAA, the Health Insurance Portability and Accountability Act, because of the notices required with visits to a health care provider. The most publicized part of HIPAA protects the privacy of patient information. Lesser-known HIPAA provisions are just as important. HIPAA gives employees and their families access to group insurance regardless of their health status, such as previous claims experience or knowledge of genetic disease. For many employees who lose insurance coverage, it provides opportunities to join other group plans or buy individual insurance.
- #26 Other amendments to ERISA regulate private insurance by requiring that certain types of coverage be provided. For example, the Newborns and Mothers Health Protection Act of 1996 provides for at least a forty-eight hour hospital stay following childbirth. The Mental Health Parity Act of 1996 requires that lifetime and annual dollar limits on coverage for mental illness be the same for as medical or surgical benefits. The latest rider on this bill was in 2008, when the Troubled Asset Relief Program, or TARP, was signed into law by President George W. Bush. Finally, the Women's Health and Cancer Rights Act of 1997 provides coverage of certain post-mastectomy benefits for women who undergo mastectomy that includes reconstructive surgery and treatment of complications.
- #27 The Patient Protection and Affordable Care Act, passed in 2010, is the official name for what many refer to as the health care reform law. This law improves access to health insurance for children, young adults, and people who have been denied insurance due to a preexisting condition. In addition, insurance companies are no longer allowed to impose lifetime limits on most benefits, and the law is phasing out the annual limits that companies can impose. Patients in some plans get free access to certain preventive services, and seniors who are experiencing the Medicare D coverage gap receive a fifty-percent discount on brand-name drugs.
- #28 This concludes Lecture d of Financing Health Care, Part 1. In summary: Insurance works by spreading financial risk. Insurers pay providers based upon the diagnosis code, procedure code, or the service provided, and contractual agreements for fees.
- #29 Individual organizations run private insurance and operate under state and Federal laws. Different types of insurance plans include indemnity plans, Blue Cross Blue Shield plans, and managed care plans. The term managed care is used to describe techniques designed to provide comprehensive health care, manage outcomes and quality, and control costs. Managed care balances choice with cost, where fewer choices translate to lower insurance premiums and lower out-of-pocket costs. Both state and federal laws regulate private health insurance. The most important federal laws regulating insurance are ERISA, COBRA, HIPAA, and the Affordable Care Act.
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