Policy and Regulatory Framework for Private Health Insurance Gary Claxton Vice President, Kaiser Family Foundation April, 16, 2010

Market Segments Private health insurance (PHI) has distinct segments: Direct purchase coverage (nongroup and some associations) Employer-sponsored coverage Small group Larger group Insured Self-funded Supplemental and limited benefit coverage Segments are regulated differently State and federal roles vary by segment HIPAA and ERISA Other federal laws (e.g., ADA) may apply to aspects of employer-provided coverage

Benefit standards States generally establish the minimum levels of required benefits for PHI Offer or provide Vary by state and by market segment State laws do not affect self-funded plans About ½ of people with PHI are in self-funded plans Federal law can (and sometimes does) set standards for PHI Benefits in self-funded plans are determined by federal law Most federal standards aimed at process and ensuring that plans sponsors deliver what they promise Very few federal standards regarding benefits that must be provided Health reform bills would give the federal government a substantial role in determining benefits that would be offered by PHI

Some Policy Considerations Purpose for covering a benefit Financial protection Encourage use Insurance v. direct subsidy Permit cost-sharing? Insurers generally have significant discretion in how they provide a covered benefit Network Reimbursement Management of use