Private
health insurance may be purchased on a group basis (e.g., by a firm to cover
its employees) or purchased by individual consumers. Most Americans with
private health insurance receive it through an employer-sponsored program.
According to the United States Census Bureau, some 60% of Americans are covered
through an employer, while about 9% purchase health insurance directly.
Private insurance was billed for 12.2 million inpatient hospital stays in 2011,
incurring approximately 29% ($112.5 billion) of the total aggregate inpatient
hospital costs in the United States.
The
US has a joint federal/state system for regulating insurance, with the federal
government ceding primary responsibility to the states under the
McCarran-Ferguson Act. States regulate the content of health insurance policies
and often require coverage of specific types of medical services or health care
providers. State mandates generally do not apply to the health plans
offered by large employers, due to the preemption clause of the Employee Retirement
Income Security Act.
Employer-sponsored
Employer-sponsored
health insurance is paid for by businesses on behalf of their employees as part
of an employee benefit package. Most private (non-government) health coverage
in the US is employment-based. Nearly all large employers in America offer
group health insurance to their employees. The typical large-employer PPO
plan is typically more generous than either Medicare or the Federal Employees
Health Benefits Program Standard Option.
The
employer typically makes a substantial contribution towards the cost of
coverage.[56] Typically, employers pay about 85% of the insurance premium for
their employees, and about 75% of the premium for their employees' dependents.
The employee pays the remaining fraction of the premium, usually with
pre-tax/tax-exempt earnings. These percentages have been stable since 1999.
Health benefits provided by employers are also tax-favored: Employee
contributions can be made on a pre-tax basis if the employer offers the
benefits through a section 125 cafeteria plan.
Although
workers are effectively paid less than they would be, because of the cost of
insurance premiums to the employer, employer-sponsored health insurance offers
several benefits to workers, including economies of scale, a reduction in
adverse selection pressures on the insurance pool (premiums are lower when all
employees participate rather than just the sickest), and reduced income
taxes. The disadvantages include disruptions related to changing jobs, the
regressive tax effect (high-income workers benefit far more from the tax
exemption for premiums than low-income workers), and increased spending on
healthcare.
Costs
for employer-paid health insurance are rising rapidly: since 2001, premiums for
family coverage have increased 78%, while wages have risen 19% and inflation
has risen 17%, according to a 2007 study by the Kaiser Family Foundation.
Employer costs have risen noticeably per hour worked, and vary significantly.
In particular, average employer costs for health benefits vary by firm size and
occupation. The cost per hour of health benefits is generally higher for
workers in higher-wage occupations, but represent a smaller percentage of
payroll.[59] The percentage of total compensation devoted to health benefits
has been rising since the 1960s.[60] Average premiums, including both the
employer and employee portions, were $4,704 for single coverage and $12,680 for
family coverage in 2008.
However,
in a 2007 analysis, the Employee Benefit Research Institute concluded that the
availability of employment-based health benefits for active workers in the US
is stable. The "take-up rate," or percentage of eligible workers
participating in employer-sponsored plans, has fallen somewhat, but not
sharply. EBRI interviewed employers for the study, and found that others might
follow if a major employer discontinued health benefits. Effective by January
1, 2014, the Patient Protection and Affordable Care Act will impose a $2000 per
employee tax penalty on employers with over 50 employees who do not offer
health insurance to their full-time workers. (In 2008, over 95% of employers
with at least 50 employees offered health insurance). On the other
hand, public policy changes could also result in a reduction in employer
support for employment-based health benefits.
Although
much more likely to offer retiree health benefits than small firms, the
percentage of large firms offering these benefits fell from 66% in 1988 to 34%
in 2002.