PHP 0310 Lecture Notes - Lecture 6: Health Insurance Mandate, Unitedhealth Group, Employee Retirement Income Security Act

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8 Feb 2017
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02-06: Private Insurance and the ACA
Monday, February 6, 2017
5:02 PM
Basic Concepts of Private Insurance
Classifying private plans
o Employer based/group vs. individual
EBI: employer based insurance/ESI: employer sponsored insurance
o Large vs. small
o State-licensed/"fully insured" vs. self-insured
o Tax subsidies for employer based insurance
EBI/group vs. individual (non-group)
o Risk pooling: the bigger the company, the bigger the pool and the more risk is spread
Pre-ACA: no pooling for individual insurance
Post-ACA: pooling in health insurance exchanges on individual market
o Underwriting for groups
Less risky because underwriting focuses on groups not individuals
Idea of actuarial stability (can predict utilization better)
Less expensive because you don't have to assess risk of each individual
o Less of adverse selection problem because people in the company didn't select the company
because of health risks
Between companies, there is experience rating: within a company there is in effect
community rating
Size
o EBI
Large group >200 employees
Small group <200 employees
ACA defines "small employer" as 2-50 employees
o Individual
State-licensed vs. self-insured (p202-203)
o State-licensed/"fully insured": regulated by states
Employer pays a premium for each employee, the plan assumes full insurance risk for
the employee
Tend to be smaller employers (3-199 employee range)
BCBS, Aetna, United Healthcare
o Self-insured/funded: NOT regulated by states, regulated by federal government under ERISA
law
Company insures itself rather than purchasing insurance
Contract with 3rd party to administer benefits
Tend to be larger employers with employees in multiple states
Tax subsidies for EBI
o Healthcare premiums are not counted as taxable income
Premiums paid by employer to purchase employee health insurance do NOT count as
income
o Huge public subsidies because both company and individual contributions to health
insurance are tax exempt: $144B/year
Problems with ESI
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ESI is still the market of first resort, it's what everyone wants
o Because only have to pay part of premium and get huge tax benefit
However, costs continue to rise and there is cost shifting to patients, in particular use of high
deductible plans
o Average annual worker and employer contributions to premiums and total premiums for
family coverage
Continued cost increases
Relative worker contribution is much less than actual price - people think it's much
less expensive than it is
o Gap between worker's earnings/inflation and health insurance premiums/workers
contributions is increasing dramatically
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