Get the facts: How does health care work?
Open a newspaper, turn on the nightly news, or scroll through your social feed, and you’re likely to come across conversations about the challenges facing our health care system. These conversations are important, but they’ve also revealed there’s a lot of confusion about health care, and for good reason – it’s very complex.
In this series of articles, we’re setting out to debunk some of the most common myths and misconceptions about health care and health insurance. Our goal is to clear up the confusion and provide the facts about how the health care system works so we can identify solutions to make it better.
You might be surprised to learn that it’s likely not your health insurer deciding what care is covered by your plan.
Most of us are familiar with health care providers – the doctors and hospitals that provide care. But not many people have heard of the concept of health care “payers” unless they happen to work in health care.
Payers are just what they sound like – the entities that pay for the health care people receive. The three main types of payers are:
- Health insurers
- Employers
- Federal and state governments
Health care payers are often referred to as the health plan sponsor. These plan sponsors are responsible for designing the health plans that the majority of Americans are enrolled in and determining what care and services will be covered.
How do employer-sponsored health insurance plans work?
About 165 million Americans are enrolled1 in employer-sponsored health care plans, and 65% of them are enrolled in what’s called a self-insured plan. For employers that choose to self-insure their benefits, the health insurance company they select provides administrative services such as handling calls from members and paying claims. But as the phrase “self-insured” suggests, it’s the employer’s funds that cover claims payments.
Self-insured employers can design their health plans and determine what will and won’t be covered for their employees. So if you’re enrolled in one of these plans and there’s something you don’t like about it, whether it’s the premium you pay each month, your out-of-pocket costs when you access care, or the care that’s covered, it’s important to remember that your health insurer probably isn’t the one that designed it that way. Your employer did.
Some employers choose to fully insure their health benefits, which means the health insurance company pays for the care their employees receive. These employers don’t have as much flexibility to design their plans, but they’re still usually presented with a set of options from their health insurer and can choose the plan they feel best meets their employees’ needs.
How do government health insurance plans work?
Government-sponsored plans, like Medicare and Medicaid, work in much the same way. The Centers for Medicare & Medicaid Services (CMS) is the plan sponsor for Medicare plans and establishes requirements for the care that all plans must cover. That’s why Medicare Advantage plans cover the services that Original Medicare does, but health insurers that offer these plans also have flexibility to cover extra benefits that aren’t covered by Original Medicare. These can include things like gym memberships, dental, hearing, transportation and food benefits.
For Medicaid and individual exchange plans, both CMS and individual states determine what care must be covered.
How does regulation impact health insurance plans?
The health insurance industry is also heavily regulated by both the federal government and state governments. This is another important factor that influences how health plans are designed.
- A series of laws applies to all types of health plans. These laws set minimum standards for the care that must be covered, how much plan members can be charged in the form of monthly premiums and out-of-pocket costs, and the network of hospitals, doctors and other providers that members can access.
- Your plan sponsor has an obligation to follow these laws when designing its health plans, and your health insurer is legally responsible for upholding the plan design.
Here are a couple examples of how this all works in practice:
- UnitedHealthcare Employer & Individual serves thousands of employers. These employer customers make unique decisions about the benefits they want to offer their employees. So UnitedHealthcare offers more than 74,000 health plans for its employer customers. Last year alone, the company established more than 30,000 unique customer benefit plans.
- Every spring, health insurers are required to submit “bids” for each Medicare Advantage plan they’d like to offer the following year to CMS for approval. So, if you’re enrolled in a Medicare Advantage plan, the federal government approved its design and benefits last year.
Learn more about UnitedHealthcare Individual and Family plans
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