Before they act to repeal, replace, or repair the Affordable Care Act, the Trump administration and GOP legislators should understand how the U.S. healthcare system currently works.
This is what our healthcare delivery system looks like today:
This is what it looked like before the ACA:
And how it might look in the future:
Notice what all three graphs have in common?
Health Insurers as Financial Intermediaries
Health insurers are at the center of the U.S. health care system, a position they are likely to maintain under any repeal/repair/replace scenario. Health insurance companies serve as the system’s financial intermediaries, meaning they act as the middlemen between those who seek healthcare and those who provide it. Money flows from consumers/patients/employers/governments to health care providers through health insurers.
Many people think the main role of health insurers is to act as gatekeepers to the health care system. Health insurance companies do manage access to health care services through their ability to approve or to disapprove payment for services (based on approval guidelines which may be dictated by private contracts or government regulation). But this secondary managed care role has grown out of the their primary role as financial intermediaries.
Health Insurance Markets
The U.S. health insurance marketplace is actually five different markets, each covering a different segment of the insured population.
In future blog posts we will delve into each of these segments in greater detail.
They are:
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Group Health Insurance / Employer Coverage
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Federal Employee Health Insurance
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Individual Health Insurance (includes ACA Marketplaces)
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Medicare
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Medicaid
The first three markets (Group, Federal, and Individual) are administered almost entirely by health insurance companies (this includes third-party administrators of self-insured group plans). But health insurers can also act as intermediaries in the Medicare and Medicaid markets. While Medicare is considered a single payer system, Medicare beneficiaries can choose to be covered by a Medicare Advantage plan (also called Medicare+Choice or Medicare Part C), with premiums paid by the Medicare Administration. Medicare Advantage plans are primarily managed-care plans, like HMOs and PPOs, administered by private health insurers. Medicaid beneficiaries may also receive coverage through managed care plans. Medicaid managed care providers (insurers) contract with state Medicaid agencies to provide care for a set amount per member per month, with the premiums covered jointly by the Federal and State governments.
State Regulation
In the U.S., insurance regulation is primarily the purview of the states. How the states came to regulate the insurance industry will have to be the subject of a future post. You can also see what we wrote about the subject way back in 2003. State insurance regulation includes licensing, financial oversight, consumer protection, and rate-regulation. Before the passage of the Patient Protection and Affordable Care Act (PPACA) of 2010, aka the Affordable Care Act (ACA), aka Obamacare, the federal government had made limited headway into insurance regulation. Federal oversight of the insurance industry expanded with the passage of PPACA, along with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. But state governments still serve as the primary regulators of insurers operating in their states.
The consequences of state regulation are pretty obvious. Today, despite federal requirements for who and what services health insurers must cover, insurance companies still have to be licensed separately in every state where they operate. They cannot sell insurance across state lines (as some ACA replacement plans would like to allow them to do). Under the ACA, some states set up their own health insurance exchanges, while others (often for political reasons) chose to provide coverage through the federal marketplace. At this point we actually have four different types of ACA marketplaces (See below).
How well each of these state insurance markets operate is similarly varied. The steep premium increases (cited repeatedly by House Speaker Paul Ryan), affect some states much more than others. Likewise, the number of insurers offering marketplace plans vary by state. Next, add Medicaid expansion (32 states participate as of Jan. 2017) to this kaleidoscope of coverage.
Risk and Consequences 