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Topic overview

Health insurance provides for coverage or payment against loss due to injury or ill health. That’s the basic definition. In the United States, however, there are numerous forms of health insurance, both publicly and privately funded.

Medicaid is the nation’s main public health insurance program for people with low income and the single largest source of public health coverage in the United States. The program covers nearly 70 million Americans. Another major public health insurer is Medicare, which covers 55 million Americans who are 65 years and older, and also certain younger people with disabilities and those with end-stage renal disease. Other public programs include the Children’s Health Insurance Program, which covers 8.1 million children, and TRICARE, which provides coverage for 9.4 million uniformed service members, retirees, and their family members. Since the federal government also is one of the nation’s largest employers, its Federal Employees Health Benefits Program covers more than 8 million federal employees, retirees and family members.

Add to the mix the private health insurers, employment-based insurance, the new insurance marketplaces and the nation’s population of uninsured, and that’s a lot of ground to cover. Since Congress passed the Affordable Care Act in 2010, the health insurance industry has changed dramatically. These changes include efforts by health insurers to foster the delivery of better care at lower costs, to drive down the cost of care, and to enroll more Americans in health insurance plans. All of these stories are worthy topics for journalists to report.

The enrollment of more Americans is perhaps one of the most significant ACA success stories. The uninsured rate among U.S. adults 18 years and older fell to 11.4 percent in the second quarter of 2015, Gallup and Healthways reported, a decline of almost six percentage points since the fourth quarter of 2013, just before the ACA’s individual mandate took effect. The rate in the second quarter of 2015 was the lowest recorded since daily tracking of this metric began in 2008, study said.

While the U.S. health care system is often cited as being among the best in the world, it is also the most costly health system. One of the most significant factors driving up those costs are administrative expenses, meaning what the nation spends on paying for care. Administrative costs are separate from the cost of delivering actual health care. Using data from 1999, researchers estimated in an article published in The New England Journal of Medicine in 2003 that about 30 percent of American health care expenditures went for administrative costs. This rate is about twice that of Canada, the researchers wrote in the article, “Costs of Health Care Administration in the United States and Canada.” If that percentage is true in 2018, then $5,700 goes for administrative costs out of the average of about $19,000 that U.S. workers and their employers pay for family coverage each year, according to Austin Frakt, who writes the Incidental Economist blog for The New York Times. In an article, “The Astonishingly High Administrative Costs of U.S. Health Care,” Frakt explained that the article in NEJM remains the only one on administrative costs that encompasses the entire health system, and that it shows that like the overall cost of the nation’s health system, its administrative costs alone are No. 1 in the world.

Efforts to contain costs

Another significant health insurance trend that journalists follow is how health plans and purchasers have over time shifted more of the cost of health insurance to American workers. In 2014, companies that provide health insurance to approximately 150 million employees were asking workers, retirees and family members to pay more for insurance in the form of higher deductibles and copayments. In 1988, for example, 73 percent of workers were enrolled in traditional indemnity plans (which typically had little cost sharing), 16 percent were in health maintenance organizations (with some cost sharing), and 11 percent were in preferred provider organizations (with more cost sharing). High-deductible health plans, which require even more cost sharing, weren’t being sold in 1988.

By 2015 that mix had shifted significantly, according to the Kaiser Family Foundation. Fewer than 1 percent of workers were enrolled in traditional indemnity plans, 13 percent were in HMOs, 58 percent were in PPOs, 8 percent were in point-of-service plans, and 20 percent were in high-deductible health plans. Another telling statistic showing how employers have shifted costs to workers is the percentage of employers that now require annual deductibles of $1,000 or more for single coverage. In 2006, 10 percent of all employers required such deductibles. By 2014, 41 percent of all employers required deductibles of $1,000 for single coverage.

Partnerships and consolidation

Another trend that employers and health plans have fostered were efforts to get workers to enroll in wellness programs by offering financial incentives to boost enrollment and penalties for those who did not enroll. Although some research has questioned the economic value of wellness programs, employers and health plans continues to offer them, believing they help to keep workers and health plan members active and healthy.

An important story to follow is how the ACA led hospitals and health systems to take on the role of insurers and to align with insurers in innovative ways. The ACA called for the development of Accountable Care Organizations (ACOs), for example, which are groups of doctors, hospitals, and other health care providers, who come together to deliver coordinated high quality care to their Medicare patients. When ACOs succeed in delivering high-quality care and keeping costs below certain targets, the Medicare program shares the savings. In some ACOs, Medicare requires the providers who exceed cost targets to repay those amounts.

ACOs give hospitals and health systems a chance to increase revenue by sharing the financial risk of delivering care. Another way hospitals and health system can increase revenue is to take on the role of health insurers. A report by Strategy& (formerly Booz & Company) showed that about 300 to 400, or about 50 percent, of health systems operating in the United States will become health care payers in the coming years. They believe they can improve care management and use their direct relationship with consumers to their advantage, the report said.

Another way hospitals are getting into the insurance business is by sharing risk with insurers. For example, Anthem Blue Cross and seven hospital systems created a new health plan in Southern California in 2014 called Anthem Blue Cross Vivity. Usually, health plans contract with hospitals and then pay them to provide care to health plan members. But with Vivity, Anthem Blue Cross will share the financial risk and potential financial gain of delivering care with the seven hospital systems. Such partnerships may be one way that insurers and hospitals can limit the rising cost of health care for employers and workers.

The success of the ACA depends in part on how well health insurers compete in all cities and towns nationwide. The ACA included funding in the form of $2.4 billion in loans to create nonprofit consumer oriented and operated plans (co-ops). Designed to increase competition and consumer choice, these member-operated health insurance plans were established in 24 states in 2013. In that first year, the co-op in Vermont did not receive a state license to operate and was disbanded. Since then, the federal Office of Inspector General (OIG) has reported that most co-ops have struggled to enroll enough members to be successful financially. In July 2015 the OIG reported that as of Dec. 31, 2014, 21 of the 23 co-ops had incurred net losses and none met its goals for enrollment and profitability. For the Iowa/Nebraska co-op, year-end data were unavailable because the Iowa Insurance Commissioner took control of the coop in December 2014 due to financial concerns; the co-op was liquidated in March 2015. The Louisiana Health Cooperative, Inc., which had 16,000 members in 2015, decided in July 2015 not to take new members for the 2016 plan year. Other coops suffered losses ranging from a high of $50.4 million in Kentucky to $3.5 million in Montana, the OIG said.

The only co-op to report a profit was Maine Community Health Options. It had $5.9 million in net income and had enrolled 80 percent of the 75,000 Mainers in the state’s individual insurance market. It was so successful that it expanded into New Hampshire in 2015.

When the OIG report came out in July 2015, four of the nation’s five largest health insurers were involved in talks that could result in mergers or acquisitions. In 2015, Aetna sought to acquire Humana, and Anthem said it would purchase Cigna. To proceed, the acquisitions would need regulatory approval.

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