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Health Insurance

Types of Health Insurance in the United States

The U.S. health insurance landscape is a mix of public programs and private plans, each serving different segments of the population. Here’s an overview of the most common types of health insurance available in the United States:

1. Medicaid

Target Audience: Low-income individuals and families
Administered By: Jointly by federal and state governments
Key Features:

  • Provides free or low-cost health coverage.
  • Eligibility is based on income, family size, disability status, and state-specific rules.
  • Covers essential health benefits including doctor visits, hospital care, long-term care, and more.
  • Expansion under the Affordable Care Act (ACA) allowed more adults to qualify in many states.

2. Medicare

Target Audience: Adults age 65+ and certain younger individuals with disabilities
Administered By: Federal government
Key Features:

  • Part A: Hospital insurance
  • Part B: Medical insurance (doctor visits, outpatient care)
  • Part C (Medicare Advantage): Bundled plans offered by private insurers that include Parts A and B and often Part D
  • Part D: Prescription drug coverage
  • Beneficiaries can choose between Original Medicare (Parts A & B) and Medicare Advantage plans.

3. ACA Marketplace Plans (Obamacare)

Target Audience: Individuals and families who don’t get insurance through employers or public programs
Administered By: Federal or state-run exchanges
Key Features:

  • Offers standardized plans: Bronze, Silver, Gold, and Platinum (varying by coverage and cost).
  • Subsidies are available based on income to reduce monthly premiums and out-of-pocket costs.
  • All plans cover essential health benefits and pre-existing conditions.

4. Employer-Sponsored Insurance (ESI)

Target Audience: Employees and their families
Administered By: Private insurers, offered through employers
Key Features:

  • Most common form of health coverage in the U.S.
  • Employers often pay a significant portion of the premium.
  • Plans vary widely in coverage, networks, and deductibles.

5. Private Health Insurance (Direct Purchase)

Target Audience: Individuals who buy insurance outside of ACA exchanges or employer plans
Providers Include: UnitedHealth Group (UNH), Anthem, Aetna (CVS), Cigna, Humana, etc.
Key Features:

  • May include short-term plans or high-deductible catastrophic plans.
  • Less regulated than ACA marketplace plans.
  • Premiums and coverage can vary significantly depending on the insurer and state.

6. Children’s Health Insurance Program (CHIP)

Target Audience: Children in low- to moderate-income families
Administered By: State governments with federal funding
Key Features:

  • Covers children who don’t qualify for Medicaid but can’t afford private insurance.
  • Covers routine check-ups, immunizations, doctor visits, prescriptions, and more.

Health Insurance Performance Metrics

1. Medical Loss Ratio (MLR)

  • What it is: The percentage of premium revenue spent on medical claims and quality improvement.
  • Why it matters: Indicates how efficiently a company is managing healthcare costs. The ACA requires at least 80–85% of premiums be spent on care (depending on plan type).

2. Administrative Expense Ratio

  • What it is: The percentage of premium revenue spent on administrative costs (e.g., claims processing, salaries).
  • Why it matters: A lower ratio suggests lean operations and more room for profit, especially important in Medicare Advantage and Medicaid contracts.

3. Benefit Expense Ratio

  • What it is: Total healthcare benefits paid as a percentage of premium revenue (broader than MLR).
  • Why it matters: Affects profitability; sharp increases may suggest pricing or cost-management issues.

4. Membership / Enrollment Growth

  • What it is: Number of covered lives across different segments (e.g., Commercial, Medicare Advantage, Medicaid).
  • Why it matters: Core driver of revenue and market share. Also provides visibility into strategic strengths (e.g., senior population = Medicare Advantage strength).

5. Premium Yield per Member

  • What it is: Average monthly premium collected per insured member.
  • Why it matters: Reflects pricing power and risk mix. Declines may suggest competitive pricing pressure or less profitable member pools.

6. Net Premiums Earned

  • What it is: Premium revenue actually earned over a period, excluding reinsurance or adjustments.
  • Why it matters: A true revenue measure tied to actual coverage provided; helpful for comparing core insurance income.

7. Segment Mix

  • What it is: Share of revenue or membership by segment — typically Commercial, Medicare Advantage, Medicaid, and Individual ACA.
  • Why it matters: Each segment has different margins and growth profiles. For example:
    • Medicare Advantage = high growth but heavily regulated
    • Medicaid = low-margin, high-volume
    • Commercial = more pricing flexibility, but competitive

8. Capitation vs. Fee-for-Service Mix

  • What it is: The proportion of care paid via capitation (fixed per-member fee) versus fee-for-service.
  • Why it matters: Capitated models transfer more risk to providers and favor insurers that manage care well (like UNH’s Optum model).

9. Risk Adjustment Revenue

  • What it is: Government payments to insurers covering high-risk populations (especially in ACA and Medicare Advantage).
  • Why it matters: Affects margins significantly; shows ability to accurately code and manage risk populations.

10. Rebate Liabilities

  • What it is: Amount owed back to policyholders due to MLR falling below regulatory thresholds.
  • Why it matters: A sign of under-spending on care, which can lead to reputational risk or lost earnings.