Health Insurance

B

3

Point-of-Service Plans

Point-of-service (POS) plans combine aspects of indemnity health insurance policies with some elements of PPOs. Like PPOs, point-of-service plans establish contracts with healthcare providers who agree to offer services to plan members. Unlike PPOs, which require participants to select a preferred provider in advance, point-of-service plans allow participants to choose at the time they need healthcare whether to seek treatment within the plan's network of healthcare providers or outside the network. Expenses for services received outside the network are reimbursed, usually after the patient pays a specified deductible amount and a coinsurance percentage. The benefits are exactly the same as in a PPO plan if the services are provided by a healthcare provider on the preferred list. The benefits are exactly the same as an indemnity policy if the healthcare provider is not on the preferred list.

C

Government-Funded Plans

Established by the U.S. Congress in 1965, Medicare and Medicaid offer basic healthcare coverage to qualified individuals, but these programs do not always provide access to comprehensive medical treatment. Limited funding for these programs can also lead to long waiting periods for nonemergency procedures.

C

1

Medicare

Medicare is a health insurance program in the United States that helps provide access to health services for citizens 65 years of age and older. It also provides health coverage for people under age 65 who have certain disabilities, such as kidney disease. Medicare is funded primarily by federal payroll taxes and by monthly premiums paid by participants.

As with other U.S. government health programs, Medicare provides a foundation of insurance, but it also leaves gaps in the services it covers. As a result, many Americans covered by Medicare choose to purchase private insurance—sometimes called “Medigap” insurance—to supplement Medicare’s coverage. While some employers offer supplemental coverage to their retired workers, many individuals purchase coverage designed to supplement Medicare when they first become eligible for the Medicare program.

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Because insurance is regulated on a state-by-state basis, Medicare supplement policies can vary from one state to the next. However, in the 1980s the National Association of Insurance Commissioners persuaded many states to require that health insurance companies offer a core Medicare supplement policy called Plan A. Many insurance companies also offer nine additional plans (B through J) that feature increased benefits—and costs. In 2003 the U.S. Congress amended the Medicare program so that for the first time it provided a prescription drug benefit.

C

2

Medicaid

Medicaid programs provide medical coverage for some people with low incomes, especially children and pregnant women. Depending on individual state eligibility requirements, Medicaid may also provide coverage for adults with certain disabilities. State programs that meet federal guidelines qualify to receive federal funding that pays for most of the program’s cost. These guidelines use federal statistics that define the poverty level (minimum level of income below which households are considered poor) to help states determine which low-income families are eligible for Medicaid.

As originally conceived, any household that fell below the federal poverty level would qualify for Medicaid benefits. In practice, however, budget shortfalls have forced states to vary eligibility standards for Medicaid. In a particular budget cycle, for example, a given state might set its eligibility requirements at 80 percent of the federal poverty level. For that year, households earning 79 percent of the federal poverty level could receive government-paid healthcare, but those earning 81 percent could receive no Medicaid benefits.

Advocates for the poor have led calls for Medicaid reform that would reinstate health insurance for all Americans below the federal poverty level. Between 1989 and 1995 the state of Oregon made changes in healthcare policy that many other states considered a model for national Medicaid reform. Oregon passed several pieces of legislation—collectively known as the Oregon Health Plan—that shifted its Medicaid requirements away from a mechanism that divided the population falling below federal poverty-level standards. Instead of asking who among the poor should receive state assistance with medical costs, the state asked what services the poor should receive, since there were not enough resources to provide all services to all qualified citizens. The Oregon Health Plan became the first state plan to limit public funding for certain healthcare services, but in doing so it expanded basic services to virtually all of the state’s poor citizens.

V

Disability Insurance

Another type of health insurance coverage is disability insurance, which replaces workers’ income when an accident or illness prevents them from performing their jobs. Disability insurance is less common than medical coverage, but it can be important to assure future financial security for any family that depends on each paycheck to meet its financial obligations. Benefits are generally structured to pay a proportion of a person’s actual earnings, usually from 40 to 60 percent. Short-term disability insurance covers up to six months of disability. Coverage for longer than six months is called long-term disability insurance. Most disability insurance policies limit coverage to a maximum period of time—such as to age 65—that determines the term of the policy.

A few U.S. states operate a system of public short-term disability coverage. The states collect payroll taxes from all workers to fund these programs. Employer-sponsored group plans can also provide disability insurance, but most employer-provided disability insurance ends when workers change jobs.

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