What’s Your Health Insurance Group?

health insurance groupTo obtain primary health insurance coverage in the United States, individual Americans must be part of a “group”. You do not simply join a “group” of your choice, but rather you must “qualify” for it!  Why do you have to “qualify”? The simple answer is money, or more specifically, who is “doling it out” and who “deserves” to receive it.  If you are not “qualified” to be a part of an existing group, then you can obtain insurance through the “group” called the “non-group”. Each one of these “groups” is taxpayer-subsidized either directly or indirectly. In the world of HICUP (BB Brigade acronym for those who are engaged in the business of health care in the USA), the “group” designations are as follows:

  • Employer-sponsored
  • Government-sponsored
  • “Non-group”

The pie chart below identifies the percentages of the total American population (about 316 million people in 2014) within each health insurance “group” along with those who fall between the cracks (the uninsured).

Health-Insurance-coverage-in-2014

The employer-sponsored “group”, with 49% of all Americans, is the largest. An American must have a full-time (and sometimes part-time) job with an employer who provides health insurance coverage as part of their compensation package to “qualify”. The employer-sponsored “group” is composed of thousands of individual “sub-groups”. Companies can either sponsor their own unique health insurance coverage (defined benefit plan) or provide employees with a fixed dollar amount (defined contribution plan)  to purchase health insurance on a private exchange set up by health insurance companies or medical provider groups. Under Obamacare (PPACA), only businesses with fewer than 50 full-time equivalent employees are not required to provide health insurance to their employees. The concept of “equivalent” employees needed to be defined because employers, wishing to stay under the 50 employee, were being very creative with part-time employment to stay below the health insurance mandate of Obamacare (PPACA).  The employer-sponsored “group” is shown below:

employer-Sponsored-Insurance

If you switch jobs or end your employment, you no longer “qualify” for your employer’s health insurance “group” (one exception being if your company provides retiree health insurance). If you get another job, you would then “qualify” for that company’s health insurance “group”. If you do not get another job, you would have to seek health insurance coverage in either a government-sponsored program or in the “non-group” markets. As a stop-gap measure, COBRA protection laws protect some Americans by allowing them to purchase their former company’s health insurance coverage at FULL cost for a limited time after separation from the job.

Government-sponsored health insurance coverage is provided for individual Americans who “qualify” for individual government health insurance programs. By far, the two largest government-sponsored programs are Medicare and Medicaid. Medicare “qualification” occurs with age (65 years old and higher) or having certain disabilities (e.g., end-stage renal disease and amyotrophic lateral sclerosis (ALS). Medicaid eligibility is set by the individual states (with minimum requirements set by the federal government) and therefore your “qualification” depends on your state of residence. Fewer people “qualify” in states that did not expand Medicaid under Obamacare (PPACA).  In addition to the above two programs, smaller government-sponsored programs include the Children’s Health Insurance Program (CHIP) and most health programs provided for the military (Department of Defense) and veterans (Veterans Health Administration). The government-sponsored “group” is given below:

government-Sponsored-Insurance

Individual Americans who do not “qualify” for either government or employer-sponsored insurance “qualify” for the “non-group” insurance. Following the convention from the other two group names, the “non-group” should have been called the “individual-sponsored” group since Americans in this group must purchase health insurance on their own. I guess that “individual-sponsored” insurance sounds too much like “non-insurance” insurance so we are stuck with “non-group”. In this group, people can buy their health insurance directly from individual insurance companies, insurance brokers, or on the new Obamacare (PPACA) Health Insurance Marketplace (also called the Exchange)  (the last option having only become available since 2014). The opening of the new Health Insurance Marketplace changed the “non-group” health insurance market overnight–from one where insurance companies were in the driver seat for maximizing profits, to one where government regulations, protections, and health insurance subsidies reign. The “non-group” market is divided up by geography (states) and age (under age 21, child-only plans and catastrophic plans for those under age 30). For a given location, the “non-group” market can be represented in the following graphic:

Non-Group Health Insurance GroupLastly, the uninsured category includes all people who do not have health insurance for various reasons (e.g., they cannot afford it, they don’t know they qualify for health insurance and therefore do not apply, or they choose not to buy it). People who have health insurance, but it doesn’t measure up to what is called the Minimum Essential Coverage (MEC)  by our government, will also be categorized as “uninsured” (e.g., a person with only Indian Health Service coverage).

Moving Between Health Insurance Groups

People move from one primary insurance ”group” to another as life events (e.g., employment, unemployment, and reaching the age of 65) make them eligible for one and not another. These same life events swell and contract the ”groups” for any given year. When the economy is poor, the government-sponsored programs increase and employer-sponsored coverage decrease. Government regulations and tax rulings are routinely tweaked to maintain levels of employer-sponsored health insurance, the bedrock of the U.S. healthcare system. Before the introduction of ObamaCare (PPACA), the uninsured rate was as high as 16.3% (2010) according to U.S. Census information.

If you qualify for one category of coverage but think that the insurance is more generous in another (either because of better benefits or lower cost), you cannot simply make a switch. You do not have the freedom to do so. If you are over the age of 65 and “qualify” for two insurance plans, Medicare has well-defined rules that stipulate when Medicare is primary and when it is secondary insurance (see the guide entitled “Medicare and Other Health Benefits: Who Pays First”). Employers have rules for spouses and children that define primary and secondary health insurance status also. For people who “qualify” for more than one health insurance “group”, insurance companies “coordinate benefits” so that benefits are not paid above the most generous primary health insurance coverage. While many low income Americans “qualify” for subsidized health insurance in the “non-group” marketplace, their spouses and children might “qualify” for more generous (and cheaper) government-sponsored programs.

Summary–Health Insurance Groups

The individual American “qualifies” for primary health insurance coverage in one of three “groups”: employer-sponsored, government-sponsored, or “non-group” (individual). The “group” “chooses” you and not the other way around. You are not free to simply switch to a more generous “group” (either because of better benefits or because of lower cost) if you are unhappy with the one for which you “qualify”. HICUP has subdivided the U.S. population into  “groups” (that are further subdivided into smaller groups) with different health insurance benefits and different taxpayer-subsidized generosity.

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