health policy week 4

Imagine you have this health insurance plan

• Deductible: $1,000

• Coinsurance: 20%

• Doctor's bill: $200

BEFORE YOU MEET YOUR DEDUCTIBLE

Your deductible paid so far

$0 / $1,000

Doctor's bill

$200

You pay

$200

You pay the full $200, and it counts toward your $1,000 deductible.

What happens AFTER you meet your deductible?

Suppose you've already paid $1,000 toward your deductible.

Now you get another $200 doctor bill:

Doctor's bill

$200

Your 20% coinsurance

$40

Insurance pays 80%

$160

The important difference:

• Before meeting your deductible: You generally pay 100% of the covered cost until you reach your deductible.

• After meeting your deductible: You typically pay your coinsurance percentage, and insurance pays the rest.

Yes

One exception: Some plans cover services like preventive care or certain doctor visits before you meet your deductible, so you may pay $0 or just a copay.

Because of Obama care ACÁ

• Medical bills 

  • When  a physcainis part of a plan, 

  • Platinum plan that plan more doctors accept that plan, 

  • This insurance plan, 

• Example ER 

  • January preventive visit 

    • $150 billed, $0 pay nothing since obama act 

  • February illness 

    • $200 billed, $200 pay for deductible, $30 for co-pay, $0 coinsurance

      • Total pay $230 

  • March preventive care 

    • $200 billed, $0 pay for deductible since Obama Act 

      • Tidal spent in year $230 

  • April injury vist 

    • $300 billed, $100 for deductuble, co-pay $30, $ 200x 30%, → $60 co-insuance pay 

      • Total pay - $190

      • Total spend in year -$420

• Very similar probme on the exam 

Yes

POINT OF SERVICE PLAN (POS)

General:  Moderate flexibility, moderate cost; combines PPO & HMO

PCP:  Required

Specialist:  Referral required

In-network;  Has a network

Out-of-network;  Covered but you will pay a higher share of the cost

Geared towards those who want the lower costs of an HMO but the option of

being able to see out-of-network doctors if necessary.

• Hybrid of PPO and HMO 

• Out of network covered but pay huhge rshare o cost 

EMPLOYMENT-BASED COVERAGE:

TYPES AND BENEFITS

•

Types: HMO, PPO, EPO, POS, HDHP

• Major Benefits

– Medical: Essential Health Benefits to Major Medical/Comprehensive

• Dental

• Vision

• Prescription Drug

• Long Term Care

• Etc 

Employer can add on additional benefits 

Varies from employer to employer 

Yes

Capitation:  A healthcare provider receives a fixed amount of money per patient for a set period, regardless of how many services the patient uses. A doctor receives $50 per patient each month, whether the patient visits once or five times.

Yes

Fee-for-Service (

FFS) A healthcare provider gets paid for each service they perform. A doctor gets paid separately for each appointment, test, or procedure.

Adverse Selection

Definition: When people who are more likely to need expensive healthcare are more likely to enroll in a health insurance plan, creating higher costs for the insurer.

Example: People who expect to need expensive treatments are more likely to purchase comprehensive insurance, potentially increasing the insurer's average costs.

3. Cherry-picking vs. Cream-skimming

Both terms refer to selecting patients who are likely to be less expensive to treat, rather than accepting a broad range of patients.

Cherry-picking: Choosing healthier or lower-risk patients while avoiding those who may require expensive care.

Cream-skimming: Similar to cherry-picking; targeting the most profitable or least costly patients from a larger population.

Example: An insurance plan tries to attract young, healthy people while discouraging people with chronic illnesses from enrolling.

Yes

Why Is Employment-Based Health Coverage Dominant in the U.S.?

Main idea: Health insurance became tied to employment because of historical events, especially during World War II.

Historical Developments

1. World War II (1940s)

The government imposed wage controls to prevent wages from rising during labor shortages.

Employers began offering health insurance as an employee benefit to attract workers instead of increasing wages.

• Jobs offer health insurances 

• Adding onto the salary 

• Employers did not want to lose their workers 

WHY EMPLOYMENT-BASED COVERAGE IS DOMINANT IN US

Historical developments

• Jobs offer health insurances 

• Adding onto the salary 

• Employers did not want to lose their workers 

• Employee share of premiums is not taxable income

• When you get paycheck, yoru ep,ployer take it out before taxes 

• Your dollar has more value 

• A "healthy or random" cross-section of population

• In order to work, you have to be healthy 

• Eveyrone pays the same amont of preniums 

ACA & ESI

• 50-Employee Threshold: companies with 50+ full-time employees

must offer health insurance to at least 95% of their full-time staff

• Penalties: If large employer fails to offer coverage or offers

“unaffordable” coverage, they must pay a fine to IRS if any employee

receives a federal subsidy to buy insurance of Marketplace

• Affordability Rule: Coverage “affordable” if employee share of

premiums for lowest-cost plan is less than ~9.1% of HHI

• Affordable care act influenced employer insurance 

• Employer mandate, if you have a larger firm, offer health insurance 

• If you offer unafforable covergge, the emplyer pays to IRS, 

• There was an insurancer market place, if teh empliwer insurance was not offering, the employer had to pay that insuance of the marktet place for the worker 

FLUCTUATIONS IN ESI COVERAGE

• Economic cycles

– Economic downturns means job and coverage loss

• Decline in “offer rate”

– Larger companies more likely to offer than smaller ones

• Decline in the “eligibility rate”

– Waiting periods to become eligible

• They do nt want people getting jobs in order to be covered 

• Some employers have waiting periods before a worker is eligible for health insurance 

• Decline in the “uptake rate”

– Prior to ACA people might opt out of insurance if premiums too high 

Yes

TRENDS IN INSURANCE COVERAGE IN

THE US, AGES 0-64

• Blue line -private insurance

• White eline - insurance

• During the recession,

•  there is a drop in private insurance, people loss their jobs 

• There is a jump in public coverage, peipel lost their jobs 

• Uninsured rate went up during the recession 

• During ACA 

  • Private insurance and public covergage goes up 

  • Uninsurance goes down

  • Emplyers required to offer healthinsurnace to their workers 

• Distribtion of health plan enrollent for covered workers by plan type 1988-2024 

• Fee for serice most poualr in the late 80s 

• Then less popular as HMO and PPOS become more popular 

• HMO was popular but then drop since people were frustrated with restriction 

• Political cartoon HMO,  keep mothers out 

• PPO became more popular 

• More recently , high deditble plans become more popular

• 2024, PPO and HDHP/PSO more popular now 

• HDHP Lower premiums and paydown their deductibles, better freedom for how people pay theri money 

Yes

• Employer based insurance goes up now 

Yes

• Blue line - firms with 200 more 

• We have a lot more small firms than large firms in the USA 

• Large firms more likely to offer health insuance plans than smaller firms 

• The more piple you have people putting into put, the risk is spread across people, theri cost pay be lower, more negotiable power, i do not want to pay that and risk is spread over hundred people 

• Ex. ucla a big pot, more negotiating power 

• Smaller firms do not offer health insurnace- smaller firms not required to offer health insurance 

Yes

Graph shows

Blue line -  who is elible for health benefits 

Green line - Who is coverge by health insurnace

• Some workers not want employer insuurance because 

• 1. Partners insuranc e

• 2. Qualify for public coverage insurance 

Yes

How many types of plans offer based on firm size 

Blue - 3 or more types 

Brown - 2 types 

Yellow - One plan 

Bigger firms offer 3 or more types than smaller firms offer one type of plan 

As firm size increases, offering increases 

Work for a larger company, 

You have a PSO, or PPO, 

The firm does not offer type of plan, 

Some of them do not want this, and do not work for them 

Reasons not to take employer insurance 

cAn’t  afford it 

Premiums are too high 

Does not fit needs 

Yes

AMONG FIRMS OFFERING HEALTH BENEFITS, PERCENTAGE THAT

OFFER TO SPOUSES, DEPENDENTS AND PARTNERS, 2016

• Different factors 

• The top line is small firms and second line large firms 

• Some small firms offer single converge and larger firms offer to your dependent or spouses 

• Some small firms not offer dependent spouses, same sex domestic partners, possible sex domestic partners 

• Some persons in smaller firms less likely to take employer insurance they do not offer their needs

• Larger firms offer better and more generous benefits to workers 

Family covergge increases 

Yes

Employer contribution increase

Midterm included 

Increase in family premiums , wokrer contributions to family premiums and inflation andworkers earning 

Inflation - these on the same track 

Orange line -family premium 

Yellow line - workers conrtibtion to premiums 

The graph is telling us 

As worker earning goes up, there is more inflation, and the family 

What they are contributing is outpacing their premiums 

They are contributing more of their earrings each year 

The gap is getting larger

Employer contributing more of their earnings to their healthcare cpst 

Effects : 

• People know how to opening up side jobs 

• People pay decisions to not take up health insuance from their  emplyer 

• People are taking up other plans 

• Cost of increasing, less disposable income, fewer people paying ofr education good or care, fewer on basic needs 

CONSUMER-DIRECTED PRODUCTS

Ideology

• More consumer choice

• Consumers more aware of true cost of care

• Relies more on consumer, less on managed care to reduce costs

Features

• High deductible health plans (HDHP)

• Health reimbursement arrangements (HRAs)

• Health Savings Accounts (HSA

Yes

PERCENTAGE OF COVERED WORKERS ENROLLED IN A

PLAN WITH A GENERAL ANNUAL DEDUCTIBLE OF $1,000

OR MORE FOR SINGLE COVERAGE, BY FIRM SIZE, 2009-

2016

• Smaller firms are more likely to enroll people with higher deductibles

Yes

EMPLOYER RESPONSE TO

INCREASING HEALTH CARE COSTS

• Increasing part-time/temporary workers ineligible for benefits

• Reduction in employer contributions and increases in employees’

premium contributions

• Reductions in coverage of dependents

• Reductions in choice of insurance offered

• Trimmed down health benefits

• Increases in premiums, deductibles, copays, cost sharing- to reduce their share 

• Increae of partime workers, not offer health benefits 

• Putting up restrcitons like waiting periods 

• Reduce teh choics of plans 

• Not offer dental or logne rterm care 

• Increase 

EMPLOYEES RESPONSE TO

INCREASING HEALTH CARE COSTS

• Switching to lower cost plans if available

• Decreases in take-up rates by employees

– Greater among more vulnerable groups:

• Those earning lower wages

• Young workers

• Those working in small firms 

• Employers are swihcing to lower cost plans 

• Greatly affects vulnerable workers 

Yes

What health insurance type best fits the following profile? 

Patient Profile: 

• Age: 32 (qualifies for an exemption)

• Health Status: No major chronic issues.

• Usage Pattern: Low.

• Financial Priority: Recently received a substantial eviction notice and qualifies for a hardship exemption. Affordability is the only factor. Needs to secure the cheapest plan possible to avoid a tax penalty and cover themselves in case of a true emergency.

• Best Fit Feature: The cheapest option legally available on the marketplace for covering extreme medical costs.

Group of answer choices

HMO

FFS (Fee-for-Service)

HDHP (High Deductible)

Catastrophic Health Plan

• 
  

A Catastrophic Health Plan is designed for people who want the lowest-cost coverage option to protect themselves against major medical emergencies. It generally has low monthly premiums and a high deductible, so routine medical expenses are mostly paid out of pocket.

Why it fits this profile:

• Age 32, under the usual age-30 eligibility threshold.

• Qualifies for a hardship exemption.

• Has low expected healthcare usage.

• Prioritizes affordability and protection against extreme medical costs.

Exam tip: Catastrophic plans are best associated with low premiums, high deductibles, and emergency protection.