Private Insurance: Over 160 Million Americans Covered

During the November 2019 Democratic presidential primary debate, former Vice President Joe Biden stated that 160 million people like their private insurance. This claim has been the subject of fact-checking, with some sources suggesting that while it may be technically correct, it omits important context and relies on a squishy number. Polling suggests that while most Americans with employer-sponsored health insurance are satisfied with their coverage, a significant number experience difficulties paying medical bills and out-of-pocket costs, leading to delays or sacrifices in their healthcare.

Employer-sponsored insurance

Employer-sponsored health insurance (ESI) is the largest source of health coverage for non-elderly U.S. residents. In March 2023, 60.4% of non-elderly people (around 164.7 million) had ESI. This figure includes people who had ESI from their own job, as well as those covered as dependents by someone within or outside their household.

ESI is a form of group health insurance, where coverage is provided under a policy or plan offered by a sponsoring group, such as an employer, union, or trade association. The selection of plans offered to employees and their specific coverage details are determined by the employer. ESI includes insurance for current employees and their families, and may also include retired employees.

There are several types of ESI plans, including Preferred Provider Organizations (PPOs), Health Maintenance Organizations (HMOs), Point of Service (POS) Plans, High Deductible Health Plans (HDHPs), and Medicare Advantage Plans. Each plan differs in premiums according to coverage tier, copays, and deductible limits, and has its own set of benefits.

The cost of ESI is usually split between employers and employees, with employers generally bearing the larger share of the insurance premium. However, employees' contributions have been increasing over time. In 2023, workers with health coverage were, on average, responsible for 17% of the premium for single coverage and 29% of the premium for family coverage.

The dominance of ESI in the US is largely a result of World War II and the wage freezes and tax policies that emerged from it. With a labour shortage during the war, businesses were not allowed to raise pay to attract workers. Instead, they began to use benefits, particularly health insurance, as a way to compete for workers.

Today, ESI is so dominant because it is an efficient way of offering coverage options to working families, and the tax benefits of employer-based coverage further enhance its attractiveness. However, ESI often results in uneven coverage, especially for those with low wages or those working at smaller firms.

High-deductible plans

High-deductible health plans (HDHPs) are health insurance policies with higher deductibles than traditional insurance plans. This means that individuals with HDHPs pay lower monthly insurance premiums but pay more out of pocket for medical expenses until their deductible is met. In 2015, an HDHP was defined as a private health plan with a deductible of at least $1,300 for self-only coverage and $2,600 for family coverage. These figures are adjusted annually for inflation.

HDHPs can be used with or without a health savings account (HSA). An HSA is a tax-advantaged account or fund that can be used to pay for medical expenses with pre-tax contributions. HSAs may only be used by those with an HDHP and are also referred to as consumer-directed health plans. HSA funds roll over and accumulate from year to year if not spent. In 2018, 22% of employers with 20,000 or more workers offered HDHPs exclusively. By 2022, that figure had dropped to 9%.

Enrollment in HDHPs has been increasing. Among adults aged 18–64 with employment-based coverage, enrollment in HDHPs with an HSA increased from 4.2% in 2007 to 18.9% in 2017. Enrollment in HDHPs without an HSA increased from 10.6% in 2007 to 24.5% in 2017. As family income level and educational attainment increased, so did enrollment in HDHPs with an HSA.

In 2022, more than half of American private-sector workers (53.6%) were enrolled in HDHPs, although this was a slight decrease from 2021, when 55.7% were enrolled. South Dakota had the highest rate of enrollment, with 72.2% of private-sector employees enrolled in HDHPs. Hawaii had the lowest rate, with only 21.8% enrolled.

The availability of HDHPs for private industry workers participating in medical care plans was 33% in 2014 and 51% in 2023. The median annual deductible for private industry workers participating in HDHP plans was $2,500 in 2023.

Medicare

There are four types of Medicare coverage, known as "parts". Part A covers inpatient hospital stays, skilled nursing, and hospice services. Part B covers outpatient services, including some providers' services while inpatient at a hospital, outpatient hospital charges, durable medical equipment, and most professionally administered prescription drugs. Part C, also known as Medicare Advantage, is an alternative that allows patients to choose private health plans with different benefit structures that provide the same services as Parts A and B, often with additional benefits such as dental and vision care. Part D covers self-administered prescription drugs.

In 2022, Medicare provided health insurance for over 65 million individuals, with spending exceeding $900 billion. The program has been in operation for almost 60 years and has undergone several major changes during that time, including the addition of benefits for speech, physical, and chiropractic therapy, as well as hospice care.

There are three enrollment periods for Medicare, and it is important to sign up as soon as possible to avoid penalties or gaps in coverage.

Medicaid

In November 2019, former Vice President Joe Biden stated that "160 million people like their private insurance". This claim was made in reference to the number of Americans who receive health benefits through work, or "employer-sponsored health insurance". While polling suggests that most people with employer-sponsored coverage are satisfied with their insurance, this statement ignores certain complexities. For instance, about 40% of people with employer-sponsored coverage have reported difficulties paying medical bills, out-of-pocket costs, or premiums. Moreover, beneficiaries with higher-deductible plans, which have become increasingly common, are less likely to be content with their coverage.

Now, onto Medicaid. Medicaid and the Children's Health Insurance Program (CHIP) provide free or low-cost health coverage to eligible individuals, including those with low incomes, pregnant women, the elderly, and people with disabilities. Each state has its own eligibility requirements, which often depend on a combination of factors such as family size, income, and the presence of a disability or pregnancy. Notably, some states have expanded their Medicaid programs to cover all adults below a certain income level.

CHIP, which operates in conjunction with state Medicaid programs, offers low-cost health coverage to children in families with incomes exceeding the Medicaid eligibility threshold. In certain states, CHIP also extends coverage to pregnant individuals.

To apply for Medicaid, individuals must contact their state's Medicaid agency or create an account with the Health Insurance Marketplace and submit an application. Even if someone does not qualify for Medicaid based on income, it is recommended that they still apply, as they may be eligible for state-specific programs, especially if they have children, are pregnant, or have a disability.

The impact of Medicaid coverage extends beyond providing access to healthcare services. Research has shown that gaining health coverage through Medicaid improves affordability and financial security for low-income populations. This is particularly evident in states that have expanded Medicaid, where declines in medical debt and improvements in health outcomes have been observed.

Public vs private insurance

In 2019, former Vice President Joe Biden stated that "160 million people like their private insurance". This figure refers to the number of Americans who receive health benefits through work, or "employer-sponsored health insurance". While polling suggests that most people with employer-sponsored coverage are satisfied with their insurance, there are still some drawbacks to this type of private insurance.

Private insurance is offered by private companies and allows individuals to select plans according to their specific requirements and preferences. It often comes with more comprehensive coverage, including extensive medical services, elective treatments, and specialized care. Private insurance also offers faster access to medical care, with reduced wait times for appointments and procedures. However, it tends to be more expensive than public insurance, making it less affordable for those with lower incomes. Some private insurance plans may also impose limitations on pre-existing conditions or specific treatments.

On the other hand, public insurance is generally operated or subsidized by the government, with the objective of providing coverage to all citizens, particularly those with low incomes, the elderly, and other individuals who qualify for special subsidies. The primary public health programs in the US include Medicare, Medicaid, and CHIP. Public insurance is more affordable than private insurance due to lower administrative costs, and it often requires no co-pays or deductibles. However, it is also less flexible, as policyholders typically have a limited selection of medical service providers, and there may be longer wait times for non-emergency medical services.

When choosing between private and public health insurance, individuals should consider their personal needs, financial capacity, and preferences. Private insurance may be preferable for those who require comprehensive coverage and faster access to medical care, while public insurance is ideal for those who prioritize affordability and universal access.

Frequently asked questions