Friday, September 11, 2009

The invisible 1/3 of U.S. health care funding

Trickling through news reports and blogs are 2008 census figures showing an accelerating shift away from employer-based and toward government-supplied health insurance. Employers in 2008 covered just 58.5% of Americans, down from 59.3% in 2007 and 64.2% in 2000.

What's often not noted in the health care debate is a parallel shift by employers from providing traditional insurance, supplied by an insurance company, to providing self-funded health care plans, generally administered by an insurance company or other "third party administrator" (TPA) and backed by catastrophic "stop-loss" insurance.

More than half of Americans who get their health coverage from their employers are in self-insured plans (the last figure I remember seeing is 55%), which are not subject to state mandates. There are more people whose health care is funded directly by their employer than by government plans, and almost as many as are insured by private health insurers (whether employer-provided or purchased directly).

Per the numbers below, presented by the Council of Economic Advisor's Cecilia Rouse and flagged by Ben Smith, little more than one third of Americans are covered by traditional private, third-party health insurance plans (a bit less than half of the 58.5% with employer-based coverage, plus approximately 9% who buy insurance directly).

Some questions worth answering: how does employer-funded health care stack up against traditional private insurance? How successful are employers at controlling costs -- are they completely in the hands of their TPAs? What percentage of health insurers' income comes from administering companies' self-funded plans, or from providing stop-loss to self-funded companies? To what extent will new health care legislation regulate employer-funded benefits? In addition to providing health insurers with a new pool of subsidized shoppers, will health care legislation offer them new opportunities to act as administrators?

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