Private Health Insurance Policy Framework: Market Segments and Benefit Standards Analysis

1. Policy and Regulatory Frameworkfor Private Health Insurance Gary Claxton Vice President, Kaiser Family Foundation April, 16, 2010

2. Market Segments • Private health insurance (PHI) has distinct segments: • Direct purchase coverage (nongroup and some associations) • Employer-sponsored coverage • Small group • Larger group • Insured • Self-funded • Supplemental and limited benefit coverage • Segments are regulated differently • State and federal roles vary by segment • HIPAA and ERISA • Other federal laws (e.g., ADA) may apply to aspects of employer-provided coverage

3. Benefit standards • States generally establish the minimum levels of required benefits for PHI • Offer or provide • Vary by state and by market segment • State laws do not affect self-funded plans • About ½ of people with PHI are in self-funded plans • Federal law can (and sometimes does) set standards for PHI • Benefits in self-funded plans are determined by federal law • Most federal standards aimed at process and ensuring that plans sponsors deliver what they promise • Very few federal standards regarding benefits that must be provided • Health reform bills would give the federal government a substantial role in determining benefits that would be offered by PHI

4. Some Policy Considerations • Purpose for covering a benefit • Financial protection • Encourage use • Insurance v. direct subsidy • Permit cost-sharing? • Insurers generally have significant discretion in how they provide a covered benefit • Network • Reimbursement • Management of use