Welcome and good afternoon everyone. My name is Allison Jones and I’m the director of program strategy and management here at the Alliance for Health Policy. We are so glad that you could join us for today’s webinar, Health Insurance Fundamentals: How the US System Really Works. For those of you who may be newer to the alliance, we are a nonpartisan nonprofit organization dedicated to helping policymakers and the public better understand health policy, the root causes of the nation’s healthcare challenges and trade-offs posed by the various proposals for change. Since our founding by senators Rockefeller and Danforth more than 30 years ago, the alliance has served as an educational resource for the policymaker community.
Health insurance in the United States 2026
As everyone on this webinar knows, health policy has not gotten any less uh complicated or easier to understand over the past 30 years. That’s why the allianc’s approach is rooted in what we call a listen first approach. We engage thought leaders, experts, policy makers and stakeholders from across the health care community to understand which questions are most important, where there is confusion or disagreement and what educational resources would be most useful to the policymaker community. You can see that illustrated on our next slide here uh to get a sense of the alliance’s model. And that is what you can expect to see from the alliance. We listen first through expert interviews and workshops to identify what policymakers need to know and then bring back those insights through accessible practical educational programming. And on this next slide here, we are going to start today by listening to all of you.
We’d love to know how would you describe your current familiarity with how health insurance markets work? Please choose uh the one that fits best. And there’s no wrong answer here. We intentionally built today’s session to work for all people coming in with different levels of familiarity. I see some responses coming in here. Some folks who are brand new, some folks who are fairly comfortable. I’ll give it about another moment here. Thanks for weighing in. About 16% of you work on this every day. Fantastic. Great. I think we’re going to go ahead and close the poll now. Um, but wherever you’re starting from, our goal today is the same, to give you a clear mental model for how health insurance works and a foundation you can carry into the policy conversations ahead. On the next slide, you’ll see how today’s webinar grew directly out of the allianc’s first the listen first process. Last year, we convened a seminar on health insurance policy and heard from experts and members of the policymaker community about where the biggest knowledge gaps remain. You can find the reports from that work on our website and in the resources tab on your Zoom screen. One message from this listening came through clearly. A strong understanding of insurance fundamentals matters in nearly every health policy debate, but the basics are still misunderstood or made more complicated than they need to be. And so today’s webinar was designed in direct response to that feedback.
On our next slide here, you’ll see we’re fortunate to be joined by experts with incredibly deep expertise across the health insurance system. But today’s sens session is intentionally focused on the fundamentals, creating a strong foundation for the more complex policy conversations that follow. So come curious, ask your questions. There is no question too basic for today’s conversation. And with that, we’d like to hear a little more from you. So on our next poll, we invite you to share uh which of these are you most hoping we clear up today? You can choose up to two answers here. I’ll give a moment for answers to come in. Fantastic. I’m seeing some votes for cost sharing. Some folks weighing in on federal and state responsibilities, how markets differ. I’ll take another moment here. Great. Thank you for sharing your thoughts. This is really helpful context and we’ll keep these interests in mind as we move through today’s conversation. On our next slide here, I just want to say we’re so especially grateful to the experts and policy makers who continue to help and shape uh the alliance designs for our educational programming, including programming designed for rising health policy leaders. That includes events like today’s webinar, but also our new bipartisan learning communities congressional fellowship program, which is now in its second year.
The allianc’s fellowship invests in emerging health policy leaders on Capitol Hill by building policy knowledge, hill specific skills, and crossparty relationships. Applications for the 2027 class open this fall, so stay tuned. And please consider nominating a rising health policy leader on the Hill. We hope that today’s webinar reflects that same commitment to making health policy education practical, accessible, and useful. And before I pass this off to our wonderful experts, I also wanted on our next slide to express our sincere gratitude to Elevant Health for supporting today’s webinar and the alliance’s broader educational programming. Elevance Health is a major supporter of our work for many years and the team fully embraces the alliance’s mission of bipartisan stakeholder neutral education. We are so grateful that they invest in our programs to share with all of you here today. Their support makes it possible for us to provide accessible nonpartisan learning opportunities just like this one to the policymaker community. So, thank you again. And that brings us to today’s conversation.
We’re here to support all of you and your learning throughout the event. We’ll leave time for Q&A at the end, but you don’t have to wait. Feel free to submit your questions at any point during the presentations um via the button there on your screen. And if we don’t get to your question, please don’t hesitate to reach out to us at info@allalthpolicy.org or and we’ll do our best to connect you to additional information. With that, I’m pleased to introduce our esteemed moderator for today’s discussion, Cynthia Cox. Cynthia Cox is senior vice president and director of the program on the ACA, where she conducts economic and policy research on the Affordable Care Act and its effects on private insurers and enroles. Her work focuses on enrollment, pricing, and competition in the ACA’s exchange markets. She also directs the Peterson KFF health system tracker, a partnership of the Peterson Center on Healthcare and KFF aimed at monitoring the performance of US health system over time and in relation to other large high-income countries.
Her work on this project focuses on trends in healthcare costs, access, and affordability as well as measures of healthcare quality and outcomes. Prior to joining KFF, she held research and advocacy positions at Columbia University Medical Center and the American Cancer Society. She also served on the board of directors of the Berkeley Free Clinic in California. Cynthia holds a bachelor’s degree from the University of California, Berkeley, and a master of public health degree from Columbia University. You can read more about Cynthia and the bios of our other panelists on the Alliance website and on the resources tab on your Zoom board. And with that, I’ll turn it over to you, Cynthia. >> Thanks, Allison. Um, so I’m gonna keep this setup kind of short so that we have as much time as possible for our panelists. Um, but just to remind everyone about the premise today, health insurance policy affects almost every American. And yet, it is still one of the most misunderstood corners of health policy. Partly because there isn’t just one insurance system.
There’s a collection of separate insurance markets, each with its own rules, its own state or regular federal regulators and its own incentives. So, as Allison said, we are doing the fundamentals today on purpose. Uh, that’s what the alliance has heard that people need more of. And I’ll say every person on this panel can go many layers deeper than what we’re going to touch on their presentations. Um, so if you have wonky in the weeds questions that you want to follow up with, I’m sure they would be happy to talk more. Um, one framing note before we start. So today is about how the system works. It’s not about how it should work. So we’re not asking our panelists to take a policy position or make recommendations. And we’re not here to assign blame or credit to anyone in the health care system. Uh, we are just here to explain the machinery and how things work.
Um, so I’m going to introduce our panelists. First, we’re going to hear from Brian Webb, who is director of Health and Life Policy at the National Association of Insurance Commissioners or the NIC, um, which represents insurance regulators from each state in the country. Um, but beyond that, Brian brings a really fantastic perspective for this panel because he’s done everything from working on the Hill as a legislative aid to working in govern Governor Pete Wilson’s Washington DC office and then for hospitals at the Federation of American Health Systems and then on the health plan side at Blue Cross Blue Shield Association and now of course working with insurance regulators. So Brian is going to start us off at the very beginning with an overview of how health insurance works and what makes it different from other types of insurance. Then we’re going to hear from Fritz Bush who is a principal and consulting actuary at Millan with more than 30 years experience as an actuary and business leader. He has priced products in the ACA, individual and small group markets.
He’s done large group pricing and plan design and he’s worked inside multiple blues plans and at McKenzie. He also advises state regulators on health reform like 1332 waiverss, public option programs, basic health plans. And in his talk, Fritz is going to give us a map of the insurance markets. Then we’re going to hear from Paul Bronston who is director of health benefits research at the Employee Benefit Research Institute where he also oversees the center for research on health benefits and innovation. Paul has been there since 1993. So he has three decades of experience on employer coverage, plan design, HSAs, and what people actually think about their health benefits. He’s an economist by training. And Paul will take us into where most Americans actually get their health coverage, employer sponsored insurance. And last, but certainly not least, we have Mila Kaufman, who is the executive director of DC Health Benefits Exchange Authority, which runs DC Health Link, which is the ACA marketplace for our nation’s capital. Mila is a nationally recognized expert on private insurance.
She’s done regulation, consumer protections, and worked on market failures like fraud and insolveny. And she’s seen the system from nearly every seat. She has been a superintendent of insurance at the state of Maine, then a research professor at Georgetown’s Health Policy Institute, and now she is one of, if not the longest serving ACA marketplace directors. So Mila will close us off out of this presentation with her perspective on the ACA marketplaces and the consumer view. Um so without further ado, Brian, I’m going to turn it over to you. What is health insurance and what makes health insurance its own animal? Sure.
We’ll start with kind of what is insurance and uh actually the NIC does not have a definition of insurance. Um, so I gave you, if you go to the next slide, just a basic definition, which is really what you’re trying to look at is an entity that is selling a product and they are bearing a risk. Uh, so that’s the basic definition and in practice each state uh will define what is an insurance product in their state and they’re going to be looking again for that. I’m selling a product, I’m getting a premium, and I am bearing some risk. I could end up paying more than that premium coming in and I’m going to bear risk on this product.
We’ll go to the next slide. We’ll go to kind of what makes health insurance different than property and casualties. So, your usual homeowners insurance or your car insurance or a life insurance product. Well, one of the big ones is like uh health insurance is very much a shorter term risk. Uh people can go years and years and years, you hope, uh without using your auto insurance, without using your homeowners insurance. And certainly, you really don’t want to use your life insurance policy. Uh so you’re going to just hold on to those a long time. They’ve got what we call long tail on them. That’s not true for health insurance. uh a great majority of people will use actually health insurance every year uh for their preventive services or for some kind of ailment or something uh that goes on with them.
So you’re you’re you’re looking at a product where there’s a constant payouts and payouts also just the complexity. Um again if you’re talking about life or property and casualty these are very big markets uh and whereas in in health you have a very fractured market you have uh the low income and the disabled they’re over in Medicaid you’ve got Medicare taking care of the older population the retirees certain disabled persons you’ve got you know different markets a large group market small group market the individual market you just have it so fractured ed into these various pools and groups.
And then just the it’s complicated uh it’s a complicated product uh determining what is actually covered uh because there’s all different providers involved, different models involved and it’s just a a far more complex product than the other insurance product. You add to that the the churn and by churn we mean people coming off and on a product. Uh whereas again a life insurance policy, you could have that policy uh literally the rest of your life. [laughter] Just one policy, one carrier.
Even car insurance and homeowners insurance, you’re not changing your carrier or your policy that much. Whereas health insurance, uh you change employers, you’re going to change insurance. Uh you just have a change in, you know, your needs, you may change insurance and change your policies. you every year in an open enrollment you may change your policy and change your coverage and again that adds a certain amount of complexity to health insurance that other ones don’t have. Uh and because of all that complexity and because of all the issues uh it is also far more regulated uh than other types of insurance. Other types of insurance they tend to let and this is at the state level where you kind of just let uh the markets handle it. Uh there is some review, there’s a review of rates, there’s review of things, and obviously there’s protections for consumers, but it’s not as regulated as health insurance where you have the government getting involved in just how it’s rated, how it’s sold, where it’s sold.
It’s just it’s a very much uh far more regulated uh type of product. And then the last one which you know we like to highlight is the federal government’s gotten involved in health insurance far more than they have any other insurance. Uh in fact whenever the federal government says they want to get involved in life insurance you ought to hear everybody scream because they just are not involved. Uh and it was nice back in 1945. Uh McCarron Ferguson made it very clear that uh insurance is a state product and to be uh regulated by state regulators. Uh well that was a nice 29 years and then uh Orisa came along and for group insurance and Orisa applies to all group insurance not just self-funded but fully insured as well where they’re buying a product. uh all group insurance and the federal government became involved in the regulation of group insurance.
Then you had health insurance portability accountability act uh 1996 which came in and was small group with far more regulatory structure uh and even a little bit of individual market too with the high risk pools and things like that. And then finally we have the affordable care act which basically put the federal government and state governments have to work together on all health insurance uh private commercial products uh whether it’s an individual small group large group uh we have coordinated effort. I would note uh that when it comes to like HIPPA in 1996 that was based on NEIC models. So basically what states were doing uh then it was extended to others. Even the ACA was built on uh Massachusetts and kind of what they were doing and where states were headed.
So states continue to be the you know laboratory uh for these things but federal government gets far more involved. We can go to the next one and look at some of the kind of core concepts of health insurance. One is lure. uh if this is a commercial product that is being sold to a group or to an individual uh then it has to be licensed in the state every state in which they operate. This is very key for state regulation. Now if it’s self-funded um then it’s outside the lensure. Medicaid managed care organizations often aren’t uh Medicare uh managed care plans do have to be licensed uh by federal law. Uh but generally speaking, we’re talking about the commercial products. Uh they have to be licensed in every state in which they operate. They also have to be solvent. And this is key for state regulators.
You don’t want somebody paying premiums for years and then find out, oh no, they don’t have any money to pay all these claims. So there’s a rigorous uh multi all the states working together to make sure these plans are solvent. There’s regular reviews, quarterly reports, annual reports, multi-year audits uh to make sure that they remain solvent. There’s also we want to make sure what the plan is. What does the we call it a form you would call it a contract. What are they actually covering? What is the plan design? Which u ailments are they going to cover? Where are they going to cover them? How are they going to cover them? What are they not going to cover? Is that clearly disclose what they’re not going to cover? And then you get into cost sharing. How much of this through a deductible through a co-pay for uh co- insurance? Uh how much of that is going to come back onto the consumer before they get coverage or while they get coverage? We’re also looking at rates.
How much are the premiums? And this is reviewed before they go into effect. Now under the Affordable Care Act, this is true for uh uh everybody in the individual small group market. They’ve got to be reviewed before they go into effect. uh and we want to make sure those premiums are appropriate. Uh we also are looking at adverse selection because this is such a bifurcated market where people have sometimes different pools that they can go to. They may be able to as a as an employer go to an association health plan, they may go self-fund, they may go to a level funded plan, they may go the commercial market. uh since they can go different places, we’re always concerned about where are the healthy people going and where are the sicker people ending up.
So, we’re always looking at the health of the market and making sure we’re not going to some kind of death spiral for uh some market. Also, because we are all managed care now pretty much very few indemnity plans out there. Um Medicare traditionals the last one, uh network adequacy is always very important. uh if I’m going to again pay premiums and it says it covers this, I must be able to find a provider that can actually provide the service. Uh so network adequacy, we review that, make sure that’s okay. And then you have just tons of consumer protections, uh making sure and some of these go to even providers that claims are paid on time, the unfair trade practices, unfair marketing practices, and all of those kinds of things. And we do an awful lot of education too of consumers.
These are kind of the key areas that state regulators look at. We’ll go to the last slide and just kind of a little bit about the NEIC. We were created in 1871. That makes us the oldest association of state employees. And you can see that’s a long time ago. Uh and already we saw that states needed to work together because these insurance policies were being sold across states and by various states. So and the the idea is that we coordinate. So we develop model laws, model regulations, white papers, guidance, manuals just to help states coordinate how they uh interact with carriers to try to not just add such a burden. You can imagine 50 different sets of laws and rules and regulations. Try to coordinate that. We also have systems uh where there’s the surf system which is a system for electronic rate form filing where everybody goes through that system. All carriers go through that system to get to their states. It’s a one-stop shop. And then we have meetings. Um, in fact, I’m at one right now.
So, and all of our meetings are open. Anybody can come interested parties. Uh, we even fund consumer reps to participate in the development of those model laws, regulations, white papers, guidance, manuals, etc. to make sure we hear from everybody. And then we do help uh the state regulators coordinate with federal agencies. So working with societ department of labor, department of justice, uh so many departments that we work with just to make sure that you know it’s a smooth coordination between federal and state regulators when it comes to uh these all these regulations. So that’s uh what I’ll give you. I’m looking forward to any questions. I think now I’m giving it over to Fritz.You are. Thank you, Brian. And I believe I have the helm here.
Is that correct in terms of the slides? I hope that’s correct. We’ll see. There we go. I do. Very good. All right. It’s working. All right. So, uh, thank you, Brian, for that. I’m going to capitalize on a little few of the things that you said uh just very briefly, but this is going to be a hule overview of the United States system. We’ll call it system of of how they ensure their their citizenry. And I call it a patchwork system. I’ve heard it called a patchwork system by other people as well. Uh but essentially what that is is it’s an aggregation of both public and private programs that come together uh to ensure most of the United States citizenry. Not all of it. Uh there is as you can see on the right there uh still a not immaterial group of people who are uninsured. And when we talk about public here what we essentially mean is sponsored by or paid for by the federal government. Uh that’s over here.
And then on the private is basically everything else. Okay? So, we don’t mean public in the sense it’s a publicly traded company. It’s just just means federal government sponsored. So, when we break this down, oops, I’ve got to get the right button here. When we break this down further, um, you know, these are the again, we set a patchwork system here. So, you can see under the public, we’ve got a number of different programs and two main markets under the private uh markets as well. Under the public, we have the two flagship programs, Medicare and Medicaid. Medicare is primarily an age-based eligibility program. Not exclusively, but it is primarily age- based. You reach a certain age, 65, and you qualify for uh parts AB uh which is hospital and non-hos uh uh coverage. Uh Medicaid is primarily, not exclusively, uh an an incomebased program. So, you qualify for Medicaid based on the level of your income uh in relation to federal poverty uh levels.
CHIP is a bit of it’s a children’s health insurance program. That’s what that stands for. This is a combined sort of a combined eligibility program. This covers children so under age 18. So, it’s age-based. Uh but it covers children whose parents don’t qualify for Medicaid uh but can’t comfortably afford other insurance. And so, the children get covered under this program. Uh then we have the two military programs. We have the VA uh which is for our military uh retired military, our veterans. Uh we have uh then the Triricare program which is for the active uh military. Uh and those are two different programs uh done by two different agencies. The VA is actually it could be probably be more characterized as a delivery system.
I I’ve included it on here because it’s an important source um you know of healthcare coverage for for for the veterans. uh but it is slightly different than than health insurance per se. And then finally, we have the federal employees program uh which is a little bit of a hybrid. It’s actually an employer sponsored program which is over here. Uh but the uh employer in this particular case happens to be the federal government. So I put it under under [clears throat] public. And then of course we have under the private we have the employer sponsored. Paul is going to go into way more detail on that. That is arguably our most complicated market. Now, some people would disagree on that uh but it but uh Paul will probably unpack that a little bit further. And then we have the individual markets in each state and then again the uninsured. So if we go one um I got to I keep hitting the wrong button here. Let’s try this one. So here are the numbers that go this is the enrollment in each of these.
But I don’t like numbers. So we’re going to go to a picture which is even better, right? picture is worth a thousand numbers. Uh so this has both uh a graphic and the actual numbers and as you can see uh the Medicaid and Medicare programs on the public side are both hovering around 70 million. That’s probably a good number for walking around purposes right around 70 million in each of those programs. Medicaid has moved around quite a bit in the last couple years as we know. Um but that’s again for purposes of our uh today uh you know those are those two are about neck andneck at about 70 million. The largest again this is we’ll delve into this a little bit later with Paul’s talk is the employer sponsored market and then you have the individual market which is relatively small and then you can see the rest of the uh the coverages uh over there.
Now, if we go back to where we started and combine these all back, uh we you can see that we get to about not quite uh but basically a 50/50 split, right? So, uh public programs coming in around 165 million and private, you know, a little bit above 170. So again, very much a partnership type approach here in the United States where you have public and private coverages combining uh to cover most people uh but still about 25 million uh uninsured. All right. So if we go back and just drill down just very briefly here, we’re going to go another level deeper. Um there’s a couple different aspects we could talk about when we talk about Medicare and Medicaid, but for for time sake, let’s do it this way.
underneath Medicare and Medicaid both there is a segment of those enroles those beneficiaries as they’re called that are enrolled in in managed care plans. This is where the government essentially subcontracts to private insurers such as elevance, United whoever uh to provide coverage and other services on behalf of the federal government for these programs. So managed care under the Medicare banner is known as Medicare Advantage. So, I’m sure everybody has heard of that. About 50%ish, again, uh good enough for our purposes today, uh of Medicare beneficiaries are in Medicare Advantage and then the rest are in fee for service, which is where the government essentially pays providers directly. On the Medicaid side, uh very similar uh managed care under Medicaid is just known as managed Medicaid.
Um and um MCOs or managed care organizations there are subcontracted by the federal government and the states. Medicaid is a state federal partnership. Um so it’s actually contracted by the states to provide the Medicaid coverage. About 80% of people under who qualify for Medicaid across all the states now um are in managed Medicaid. Uh moving on back to our diagram, we’ll talk a little bit about the private market. So we have it divided into the individual market and the employer sponsored market. Uh there is a difference in tax treatment. Uh this is maybe a bit of an aside but on the individual market um if you are under 400% of poverty level you can qualify for tax credits. Uh which uh you get in advance to help pay for your coverage and then there’s a settlement at tax time if if if they’re different. Uh but it is a tax credit. It reduces the amount of tax that you pay.
On the employer side it’s taxdeductible. uh it’s double tax deductible. It’s deductible for both the employer uh and the employee. So a little bit different tax treatment there on those. So now we’ll talk about the employer sponsored market. Again, I would argue this is one of our more complicated markets. I’ve chosen to divide it up this way. You could probably do it other ways as well, but this is what I chose. So this is what we have. So the employer sponsored market is divided up into the fully insured and the self-insured market. Fully insured is where an employer goes and purchases an insurance product which Brian mentioned before uh from an insurance company and so they pay premiums.
That means it’s an insured product. Below that then there’s different rules based on whether or not that employer is a large group versus a small group. Okay. Self-insured on the other side of the branch there is they are not paying for an insurance project product. they are simply paying for it out of their earnings. They’re just paying they’re they are they are their own insurance company effectively. Um and they may purchase some amount of stop-loss or some smaller insuranceances like that but they’re essentially insuring themselves. Uh and again those the markets here it’s a little bit different but there are different product offerings for large group versus small group. Brian mentioned this before that for the small group there’s a product called levelfunded which is a form of limited self- insurance. Brian also mentioned, and I’m going to throw this in just for fun, uh, Orisa. And so Brian was correct, Orisa applies to all insurance coverages. Okay? But for purposes of today and this diagram, I’ve just highlighted the fact that one of the important aspects of ORISA is that it exempts self-insured employers from state insurance laws. Effectively, it says this isn’t insurance.
And so because the state has purview over insured products, it basically removes them from most of the regulation uh of of state laws including things like mandated benefits and and whatnot. So if you ever hear Orisa preeemption, this is sort of where Orisa preeemption sort of slots into this this whole gap. So I thought that might be worth just putting in there. Our individual market, again, much smaller, but it’s divided up into the on exchange. Every state has an exchange. um that is where the uh subsidy eligible people under 400% of poverty level currently uh access their premium tax credits that I mentioned before. Uh so it’s mostly subsidized. There is an off exchange market where anybody can go and purchase an unsubsidized uh product as well.
All right. Then very quickly on the uninsured, this is not a market, but it might be helpful to understand that people who are uninsured are not uninsured for all the same reasons. Uninsured, you someone could be uninsured what what I would call structural reason. Uh they don’t because of the structure of our system, they don’t actually qualify for coverage under a partic particular program. A lot of these structural issues are due to immigration issues and a lot of states are doing some things to to address some of that. Some people are uninsured because they choose to be uninsured. So this is the anti-selection that Brian said. If you’re not sick, a lot of people do not see the value in health insurance, so they just choose not to be uh uninsured or to be to be insured. Some people are unaware. Uh they don’t know that they qualify for a particular program. And finally, some people are underinsured. uh they have say a short-term product uh where it runs out in 90 days or 180 days or whatever the time length is or they have some other type of limited insurance but they don’t have comprehensive insurance. All right. So from here we want to talk briefly about risk pools. So Brian mentioned this as well.
I’m sure Paul will who’s coming up as well. Risk pooling is fundamentally how all insurance works. In the health insurance market though, basically we we’re going to divide this diagram up into those who are green. These are people who are low risk. Their health care claims are essentially less than what they’re paying for premium or is being paid on their behalf in premium. Orange dots are people who have significant health needs. Maybe it’s a pregnancy, maybe it’s cancer, maybe it’s a surgery where their costs are going to exceed the premium that is being paid on on their behalf. Now the fact is is that over someone’s lifetime you are going to switch in and out of green and orange dots. I’m going to become an orange dot tomorrow. Someone’s going to be paying for my costs because my costs are exceeding my premium and I could switch back uh before.
So this is the idea that the people who are paying today are paying for for coverage for the people that need it now and you might need it in the future. So that’s a risk pool. So, where the challenge comes in is when you start getting more orange dots than green dots. Now, this is an exaggeration. You’re never going to have this many orange dots. But I’m just I just put this up here to make a point. Um this is where the risk pool is changing. It’s becoming higher risk, higher cost. And this pool is going to determine the premiums for everybody everybody in this pool. Uh so this is this is the idea of of of the risk pooling. It again it applies to all insurance. Um in terms of these markets you will often hear every every one of these markets that we talked about is a risk pool. Uh it applies differently and has different effects um on each of these. I’m going to focus my final comments here on the individual market and the employer sponsored markets.
You will often hear of anti- selection death spirals in context of say the individual market where people can choose whether or not to enroll in the individual market. In the employer sponsored market the risk pooling is actually done at the employer level. Each employer essentially amounts to its own risk pool and its rates will rise and fall based on the composition of the risk in that pool in in that employer pool. All right. So, my takeaways before I turn it over, uh, we have a patchwork system by and I put design in quotes. Um, nobody designed it. So, it just happened to that’s why it’s in quotes. It just happened to develop that way. And there’s really nothing comparable in the rest of the world.
Um, as I mentioned before, whatever segment you’re in, that determines just about everything. Price, who’s going to be regulate, who’s your regulator, uh, the tax treatment, etc. uh we have a broad system with the patchwork aggregated but again we have some 25 million people who are uninsured and then finally my opinion is our system is rather hard to move it’s pretty intrigent and the reason is is because uh each one of those segments that we talked about has uh entrenched interests they have a constituency uh that is can be and and lobbies that can be very vocal very passionate about that particular segment of the coverage um So any reform creates winners and losers. Uh and nobody really likes the loser part of that winner and loser equation, right? So it makes incremental reform about the only option uh to make the winners and losers as minimized as possible.
So I predict that we will have the system that we have probably for a very long time. I’m going to turn it over to Paul and I will look forward to any questions. >> Thanks Fritz. Hopefully everybody could hear me. Um, if you could go on to the next slide, please. Um, you know, actually one more please. Thank you. Uh, thanks Fritz and thank you to the alliance for uh including me in today’s uh program. Uh, Fritz was talking about how we’ve got this patchwork of systems. Uh I you know I think it’s actually multiple health insurance systems uh with employment based coverage as you heard kind of being the dominant system uh some would say the backbone of the US health care system uh and it’s it’s really interesting because as Fritz was walking through his slides and this is where a lot of us you know we’re all experts here yet you know we have different opinions on how to code things. So for instance, Fritz had the federal employees health benefits program as a public program.
Uh but state health benefit programs are were counted as private programs and employer in the employer sponsored circle that he had. Uh whereas I would put all of that in employer sponsored and you could see by my slide I don’t call it employer sponsored. I call it employmentbased health coverage. The reason being and one of the things that’s that that we tend to ignore when we say employer sponsored and I’m probably the only person that calls it employmentbased is union plans. Unions can sponsor health benefits too for their for their members. Uh employers may pay into the system, but it’s ultimately the union that’s providing the coverage. So that’s one of the reasons why I use employmentbased more generally. And you know Fritz had the number of people here. You’ve got the percentage of people and we look at it at Ebrie. We look at it two different ways.
We look at the total population which is in blue and the population under 65 because just about everybody when they turn 65 is eligible for Medicare and see the numbers aren’t really that different. So it doesn’t matter so much. But I think the key takeaway is that employment based coverage is the backbone of coverage for most people in the US. on the next slide. I think you know the history of how this system or multiple systems evolved is really very interesting. I highly recommend you check out chapter 2 in this book from the in what was the Institute of Medicine back in the early 90s. It walks us it walks you through how we got to where we were were at least then right does not include HIPPA or or the ACA. Um but you know I I would say employment based coverage started during World War II. Uh it it took off because of for business reasons. Employers were subject to wage controls.
They couldn’t raise wages to attract workers and there was a shortage of workers because all these people were over in Europe fighting the war. So they started offering health benefits. Health benefits were not counted under the wage cap. Uh and it was something that employers started doing to attract workers. Um years later the tax exclusion was um you know put into place uh by Congress and you know as mentioned employer paid premiums were excluded from taxable income and worker paid premiums reduce taxable income. Uh it wasn’t until 1965 that we got Medicare and Medicaid to fill in the gaps. uh it didn’t replace employer coverage but as you know it covers uh for Medicare 65 and older and certain people with disabilities and Medicaid uh for low-income people. Orisa’s already been mentioned and you know and that brings us to where we are today with employment based coverage being the backbone. Uh if you go to the next slide, you know, one of the things I’ve heard many many times over the years is how employment based coverage has been eroding. uh it’s actually been remarkably stable and and I’ve put these two this one you know trend line together from two different surveys going all the way back to 1970 which was before Orisa around 1970 about 70% of the population under age 65 had employment based coverage uh fell to about 60% a little over 60% uh around 2006 2007 and that’s where the two surveys line up and since 2006 6 2007 it’s been you know more or less stable at about 60%.
So takeaway here you know remarkably stable in terms of the the percentage of the population that’s been covered. Uh but on the next slide you’ll see more you know more um I guess variation or more you know multiple health insurance systems even within the employment based health insurance system. And and what I mean by that is uh you know most large employers offer health insurance. You could see here that among employers with a th000 or more employees 97% are offering coverage to at least some of their workers u among employers with 100 to 999 employees 94% offer coverage. So just about once you get to the point where an employer has 100 or more employees just about all of them offer coverage. But as you go down into smaller firm sizes, the percentage offering coverage is much lower. And you could see that it’s down at 24% among employers with fewer than 10 employees. When you average all this out, only 49% of employers offer coverage.
But that’s because most employers in the US are small. So if you don’t weight this, it looks like not that many employers, only half offer coverage. there’s there’s something like seven seven and a half million employers in the US about six six and a half million are considered small employers. Uh so that’s something to keep in mind but most workers work for firms that are large. Um on the next slide um you’ll see that uh this is the TR it’s very busy. This is the trend since 2000 and and by firm size and there’s certainly been some erosion in coverage uh among the smaller firms. You haven’t seen that among the larger firms. Uh and if anybody wants the specific data points just reach out to me after after the webinar. Uh next slide please. Um within employment based coverage it gets you know as Fritz started saying it’s even more complicated. There are different types of health plans that people can enroll in.
You could see how the enrollment patterns have been shifting since 1988 all the way to last year. Uh HMO coverage has gone from 16% up to 31% down to 12%. Uh something known as conventional coverage was 73% in 1988. For the most part, it doesn’t even exist anymore. Uh that’s just straightforward insurance with no networks, no uh restrictions, um PPOs. It’s a kind of network has gone from 11% in 1988 all the way to 46% today. You’ve got point of service plans and then high deductible health plans with a savings account option. That’s what that acronym stands for. They for the most part they didn’t exist about 25 years ago or they just started showing up 25 years ago and today about 33% of workers with with insurance or in a high deductible health plan with a savings option.
The one issue with this slide is we’re we’re mixing apples and oranges. High deductible health plans are typically based on a PO. A high deductible health plan is is a cost sharing arrangement whereas the other types of plans are more like a network or delivery system arrangement. Um and you could have you know hybrid systems that have some combination of both. Uh next slide. Um and then you know the the savings option part of the high deductible health plan is you know the most popular type of account or savings option is a health savings account. These were created as part of the Medicare modernization act in 2003. In order to contribute to an HSA it’s got to be paired with uh a high deduct high deductible health plan. I prefer to call them HSA eligible health plans. Um and you could see that the deductibles have to be at least 1,700 for selfonly coverage. 3,400 for family coverage. Uh this year there’s maximum out of pocket requirements as well. And the thing about HSAs is it’s really the only account that has this triple tax advantage where the money goes in tax-free. It builds up taxree and as long as it comes out of the account for a qualified medical expense, uh distributions from the account are taxfree as well. Uh, next slide. Some real basic statistics about HSAs in the upper leftand corner from 2024. And just note, you’re the first people outside of ER to see these numbers. Uh, this report is first coming out tomorrow. The average balance in an HSA is just over $5,500. Employees contribute an average of $2,300. Employers contribute an average of just over 700. Distributions are averaging almost $1,900 a year. and about 18% of people in accounts uh invest that money in the stock market, let’s say, like they do with a 401k plan.
Um, but I I don’t like just looking at the average balance of $5,500, uh, because the the percentage of people going into these accounts each year is growing. And every time you, let’s say, add 15% onto, you know, the the population with these accounts, you’re adding 15% of, you know, 15% of those accounts are starting off with a zero balance. So, I think it’s more important to look at how account balances vary over time. The longer people have had an account, the higher the balance. No surprise. And you could see how that works up at the top. The one of the things I find very interesting is the longer people have had an account, the more money they put into it. So, in 2024, the average contribution for someone who’s had an account since 2004 was almost $5,000, whereas the average account uh contribution for someone who’s had an account just one year was only about $500. And I think I have just one more slide to cover. Uh we’ve done a lot of work around um why don’t we just skip this one in the interest of time.
Um, we’ve done a lot of work around employee and this is just putting numbers on some of the uh some of the things Fritz was talking about in terms of the likelihood of self-insuring a plan by firm size. Large employers much more likely to self-insure a plan than small employers. Uh, and finally, last slide. I keep thinking I have the last slide here, but now I finally do. Um we’ve we’ve interviewed employers on lots of different aspects of health benefits and their commitment to health benefits and we have found that employers seem to be com despite the kicking and screaming about the cost of providing the benefit uh they seem to still be as as committed as they have been historically. uh which is why going back to that and don’t change slides here but going back to one of my first slides uh why you know the employeebased system has been as remarkably stable as it has been uh you know thank you so much for this opportunity to talk to you today I’m going to talk turn it over to Mila and I look forward to uh the conversation later >> thank you so much Paul I think we can go straight to the next slide thank you terrific So, I thought I would start us off with just a little bit of background about who we are and our record of success and then I’ll share uh some more details about the ACA uh and other important uh laws. Uh so, we are a private public partnership and we have a private executive board. What that means is we can do certain things that government does and we can do certain things that the private sector does.
And so we are responsible for DC Health Link which is the Affordable Care Act online health insurance marketplace in DC. Even though we were the last state to start our IT built back in 2013, we were one of four state marketplaces to open for business on time and stay open on October 1, 2013. And since then, we’ve been able to cut the uninsured rate by half in DC. And approximately 96% of DC residents are covered in different types of coverages. You’ve heard you’ve heard Paul talk about different sources of coverage and Fritz talked about it and Brian. So, different sources of coverage, but the bottom line is that 96% of uh DC’s residents have coverage. We have approximately 115,000 people covered through us with private health insurance.
You heard a little bit about public programs like Medicaid being public insurance. The 115,000 we cover are strictly private health insurance, not Medicaid. And that includes 5,300 district small businesses. And also we are the designated source of coverage for Congress. So members and congressional staff on the Hill as well as in their district offices have DC Health Link insurance. We work with approximately 900 brokers and we are responsible for about $800 million in annual premiums. Next slide, please. So, um I want to say when you’ve seen one state exchange, you’ve seen one state exchange. So, I’m going to give you information about us and each state exchange is different. Uh, and sometimes you’ll hear labels like statebased marketplace or an SBM or a state exchange. All of those labels apply to the same sorts of entities. And those are the exchanges or the marketplaces that states decided to build and manage themselves instead of relying on the federal exchange called healthcare.gov.
So for us in DC, um it’s been really important to be transparent and to create a competitive health insurance marketplace that reflects our local conditions and priorities and community needs. Almost all of our policy decisions are actually made through stakeholder work groups. That includes uh the health plans, the hospitals, the physicians, consumer groups, the chambers, employers, all patient groups. Uh everyone is at the table helping us make significant policy decisions. And being local, we’re able to use coverage design to address local needs. So we’ve through coverage design actually made health care more affordable even when our residents or employers have high deductible plans that Paul talked about. Uh we’ve essentially said that deductibles don’t apply to essential care like primary care or specialists or urgent care or even generic medication. And that makes it more affordable for our enrolles to actually access and afford care. And that coverage design is in all of our essential plans. We also advocate for the lowest possible premiums for our residents and small businesses. And our small businesses, they can be DC based and have workers anywhere in the country.
They can have employees in Texas and their employees can still get in network coverage through our small business marketplace. And we also are positioned to administer local affordability initiatives as well as the federal health insurance tax credit. Next slide, please. And we can just keep on going to the next one. All right. So, this is one of my favorites. If you’ve been to DC uh or if you live in DC, you may have visited DC Brow. Um they signed up for health insurance through us um in our early uh back I think in 2014, maybe 2015. And we being local, we love to reinvest in our customers. And so uh we put our customers in our ads. You may have seen Ben’s Chili Bowl or um other uh popular DC establishments. uh we love to feature and reinvest in our customers. Um so we can I thought I’d share that. All right, we can we can keep on going. All right, let’s go to the next slide.
Um this is um just a quick um cliffnotes. You’ve heard Brian talk about this and Fritz and Paul. There have been many federal attempts to uh expand access to coverage to populations uh that um didn’t uh have coverage in the past. And so this is just a a quick uh cheat sheet for you. Uh we in the health policy world, we love acronyms, HIPPA, um SHIP. So they’re all in here with simple reminders for you what they are. We can go on to the next slide. Great. I do want to spend a couple of minutes talking about what it was like for people who relied on the individual market or the non-group market, people who didn’t have job-based coverage before the Affordable Care Act uh was established. And so before u all of those consumer rights were enacted, you had to be in almost perfect health to to be able to buy an individual health insurance policy. Uh insurance companies were allowed to medically underwrite.
Um there was no guaranteed issue, guaranteed access, no right to actually buy coverage. So you could be rejected altogether. You could be charged higher rates based on your health or if you had coverage based on your claims experience, your annual rates would rise. Women of childbearing years were charged higher rates than men. There were no restrictions pretty much on how uh how much you can be sircharged based on your age. Uh if you were in certain industries or occupations, you could be sir charged. Uh and uh and for small businesses, all of those apply based on who you who your workers were. But also, if you were a micro uh business, five and fewer, you were even sir charged for being um um of that size and and paid higher rates than uh larger small businesses.
Um and of course, if you had any kind of medical needs, they could be excluded forever. And there were all sorts of limitations on your policy. if you reach those limits. There was no coverage after that. Uh and it was almost impossible to find coverage for maternity care and other critical u benefits. That was all before the ACA and that was the case in almost every state. There were a handful of states mostly in the New England area that um had uh consumer protections u but most states did not in the individual market. So [snorts] next slide we get to the ACA and the ACA consumer protections were a gamecher and all of those practices that I just talked about um th they became prohibited. So everyone who wants to buy coverage can they cannot be rejected from coverage because of medical needs. And coverage must work for not only healthy people but sick people as well. And so it must cover certain basic uh benefits like primary and specialists and hospital stays and lab work, preventive care, um all sorts of things that most of us take for granted that have been available to those of us who have job based coverage with health insurance um have taken for granted um at times.
Now all of those protections and benefits are available to individuals um in ACA plans. Um I also uh want to highlight that one of the most important changes the ACA made is to recognize that some individuals who want to buy health insurance just can’t afford it. So the federal government has the federal health insurance tax credit and we sometimes call it premium tax credit advanced premium tax credit. Uh Fritz refer to it as subsidies. All of those labels are correct. Uh when an individual purchases health insurance through either the federal exchange or a state exchange, statebased marketplace, they can qualify for lower premiums on a monthly basis. The federal tax credit applies and they just pay their share. And the way it works is uh if your income is up to four times the federal poverty level uh and you’re above Medicaid uh for your household income, you can qualify for some amount of lower monthly premiums. And next slide, please. Um after COVID uh we had the American Rescue Plan and the Inflation Reduction Act and that for the first time expanded the health insurance tax credit and made it more affordable and available to middleclass families uh that were not eligible under the traditional or the classic ACA uh health insurance premium. And that was also a game changer for us in terms of sole proprietors and small businesses.
In DC, seven and 10 people with lower premiums under the expanded federal health insurance tax credit were actually sle proprietors or small business owners. Um so it was um a really big deal to have that. uh that tax credit expired December 31st of 2025. And so now the way the tax credit works and lower premiums is that it’s back to the ACA levels. And if your income is above four times federal poverty, unfortunately, uh there is no uh premium relief uh under uh the federal tax credit. Next slide, please. And this is uh my last slide. I just want to make sure it’s very clear that for us uh in DC for DC Health Link, we have a portion of the employer market uh through the small businesses that sign up through DC Health Link and we also have in this slide I call it the non-group market. It’s the individual market. It it is anything that is not job-based that falls into the non-group. So we have a portion of the employer market and the entire non-group market. And with that, I just want to thank so much to the team that is hosting this and for inviting me to participate and leave you uh my formal comments by saying um uh you’ve seen one state exchange. you you’ve seen one state exchange, but we all share our commitment uh to serving our customers and we’re all locally managed and accountable to the customers we serve locally. So, I think back to you Cynthia. Thanks, Mila.
Uh that was wonderful. Thank you all. So, um we’re going to do another quick poll. Uh so, now that you’ve heard from all four speakers, we would like to hear from you. um what would you most like us to dig into during this Q&A session? So, you can choose up to two of these options. They include core concepts and terminology like premiums, cost sharing, network, solveny. Um also the different markets and how they differ from each other like the individual group, Medicare or Medicaid markets. Um option three is where people get coverage and why it matters. And then option four is how the marketplace or exchange works in the consumer experience. So I’ll give you guys a couple more minutes to answer the poll and also to um submit your questions and in the meantime I’ll just add one reminder which is that as you submit your questions the most useful questions today are going to be the kind of how and why questions like how does this actually work or why does it work this way. Um, please try to avoid the should questions like what should Congress do next? Um, since the people on this panel today are here to be experts, not advocates. So, uh, while we wait for your questions, I’m going to take a moment to just ask a couple, um, quick ones. And I’d like each of the panelists to, you know, kind of keep your answers short so that we have enough time for all of the questions that are coming in. Um, but I’m going to start with a question that is about where the premium dollars actually go. Um, so I’m going to start with Fritz and then turn it to Brian and then to Mila.
So Fritz, my question for you to start is one of the most persistent kind of misconceptions that I run into um, in trying to explain this sort of stuff to policy makers or the media is kind of why is it that premiums are so high? Um, is it that insurance companies are just keeping all that money as profit? Um, so you’re the actuary in the room and I want to hear from you where the premium dollars go. Um, so what’s driving premium increases and and where do those dollars go once they come in for an insurance company? Yes. Uh, that’s a great question. Um, so again, I’ll keep it high level. Others can can pile on to my answer, but a good walking around number is that about across all the markets that we talked about, roughly again roughly 85% of the premium dollar will go to pay for costs of care, paying for people’s hospital drugs, professional costs, things like that. The other 15% of a premium dollar, excuse me, is going to go to administrative costs, uh, profit and in certain cases, sales commissions. Uh, so it’s roughly an 8515 split. Now, of the, uh, healthcare cost, the 85% that is split reasonably rough about 20% of that uh, goes to prescription drugs and that total is getting higher all the time. And then of the remaining um uh 85% uh that’s split fairly evenly between what we’d call institutional costs and professional costs.
So institutions being hospitals roughly and and professionals being uh people, doctors, nurses, etc. Great. Um and so Brian, from a regulator side, when so state regulators uh get these insurance company rate filings. These are these very long documents that insurance companies submit to state regulators where they are, you know, includes a lot of actuarial math is also some narrative kind of justification of their premium increases each year. Um, so from a regulator’s perspective, when a rate filing lands on a state regulator’s desk, what are they looking for? Uh, what are they actually reviewing? And also, what can states say no to? Yeah, basically what the state regulator, they’re they’re actuaries. uh they’re going to be looking at the actuarial documents sent by the company and they’re going to be looking for what are their projections. Remember these are projections of what the costs are going to be.
Uh so they’re looking to see if those fit within a certain um safe harbor. you know, is it reasonable uh what they’re projecting, what they’re expecting. And then overall, what they’re looking for is to make sure that whatever premium uh they’re they’re charging is not excessive, not above what a normal projection would be. Uh also that it’s sufficient. You don’t want them coming in under which could affect their solveny, maybe trying to get market share, something like that. And also, you want to make sure it’s non-discriminatory that it is applied across the board. So that’s generally what they’re looking for.
Thank you. And Mila, why should we care about solveny of insurance companies from both the market perspective or the consumer perspective? So we want our claims to be paid period. And so we want insurance companies that we get our health insurance from to be regulated. We want experts to be reviewing their books. We want to make sure that they have money to pay our claims. We want to make sure providers and hospitals get paid for our claims so we’re not stuck with the bill. And if I can just reference something that Fritz talked about, the importance of having uh risk pools that have healthy and sick people. If you just have sick people in your risk pool, you’re not going to stay in business, you will become insolvent. And so having um a risk pool that reflects good risk mix is critical. Uh and I think Brian talked about that as well. And if I can also add on to premiums.
Uh so as an exchange what we do every year is we hire our own external actuaries and every year I testify before our insurance commissioner and I advocate for the lowest possible premiums because very smart actuaries can disagree. You can put five actuaries in the room and they will give you five reasonable numbers and so reasonable people can disagree and that’s another um example of how state exchanges uh can be good advocates for the customers we serve. We get our own acties and we get our numbers into that consideration as well. >> Great. Um so I’m going to now turn to Paul. Um, so we’ve heard from the other panelists about where the premium dollars go. I’d like you to talk about how the premium dollars come in. Um, so you can focus on employment based coverage, too. But, um, so let’s let’s look there and say, so this is where most non-elderly Americans get their coverage.
What does the research show about where the dollars are actually coming from? Is it coming from employers, employees, taxpayers? Talk to us about that. Yeah, it it comes from a bunch of sources, right? I’ll put my economist hat on to answer this, which which so which means I would say that workers ultimately bear the cost of health benefits when they get it through work. It’s part of their compensation even though the employer writes the check. Uh it’s it’s the employees compensation. Uh there’s tax breaks. So the government is subsidizing it. uh keep in mind that subsidy even though employers get to deduct health what they pay on behalf of workers as a business expense they also deduct wages as a business expense. So if they stopped offering health benefits and gave workers that money as wages um you know they would still be deducting the cost of it and and one thing you know this relates back to this prior conversation about where the premiums go.
Uh, for many employmentbased plans, there are no premiums, right? And a self-insured plan, nobody’s paying a premium. It feels like, it feels like it, it looks like it, but it’s not a premium. So, uh, and and self-insured plans suffer from the same cost pressures as fully insured plans, right? And the premiums, you know, the premium equivalent, as some would say, aren’t that much different. Um, so that’s something to keep in mind, but ultimately, you know, the the cost of health benefits is paid for by workers as a form of compensation. >> All right. So, I’m going to start turning to some audience questions. I’m going to pitch this first one to Fritz and Paul, but other folks can definitely jump in, too. Um, so we’ve been hearing a lot about um people who have no health care claims in a given year. They have private health insurance or public health insurance, but they’re not using it. Um, so how should policymakers interpret data that shows that a certain share of enroles used either few or no health insurance services in a given year? Uh, which of which of you wants to start with that one? I’m happy. Go ahead, Paul. Yeah. Yeah, I’m happy to kick it off. Um, you know, the think about one of the reasons why employmentbased coverage works is because these groups aren’t formed for the purpose of buying insurance.
So, you’re going to get some people in there that use healthare and some people that don’t. U you know, the majority of people use health care, but most people don’t use a lot. It’s, you know, you’ve got your classic 8020 rule. 20% of the population account for 80% of the spending, which means 80% of the population use no or next to no health care whatsoever. And that’s what you would expect in a population. Most people are healthy. Uh and they may not need to go to the doctor. Certainly most people don’t wind up in the hospital in any given year or in the emergency department and they may not need prescription drugs. So there’s always going to be some segment of the population. You know, we talked about it before in terms of, you know, average risk and some people, you know, using more than they pay into the system and some people using less. Uh most people use less. Health insurance has evolved from a pure insurance product that comprehensive insurance that I showed you was 73% in 1988 to now covering all these other services that aren’t you know necessarily considered insurable events but you still have a you know significant size of the population that doesn’t use any healthcare but pays into it in some form so that if and when they need it it’s there for them. though Fritz or others um sometimes this data on people not using their health insurance has been used to talk about you know just the balance of the risk forwards other times it might be used to talk about program integrity or fraud um does anyone want to jump in to kind of talk about how meaningful that data is for those purposes >> um I can comment I don’t I don’t know what the what the connection to fraud would be um but I think to really emphasize what Paul is saying uh you need uh there certain you know to be if someone has zero claims there is some care uh that that doctors and insurers would like you to get for example uh you don’t want to not go with your say your screenings or your preventative exams and things like that. So um that could be one argument that people are saying well they’re not using their insurance and they really should be for those types of low uh dollar claims.
Uh so that might be one aspect of it. The other thing I would point out is that we call it insurance, but our health insurance, uh, and Brian touched on this as well, uh, is essentially it’s a it’s a combined financial vehicle. It is insurance and it’s financing. Uh, this is the way we pay for our health care. There’s a lot of things underneath an an insurance policy that technically are uninsurable. They are lowcost and they are knowable events, right? The technical definition of insurance is you don’t know what’s going to happen. You don’t know when you’re going to die. You don’t know when your house is going to burn down. But this is not true for for health insurance for the most part or for in many cases.
A lot of these services are well known. So that’s an important aspect of of of these vehicles is that they are essentially a combined vehicle. Um and they do finance uh the the way it is the way healthcare is paid for for the most part. Uh the majority of healthcare costs go through an insurance policy. The policy debate around that is should they all go through there? Right? That’s that’s where there’s been more discussion around things like say direct primary care which is paid for directly by people to to their providers. Do you even need to use insurance for primary care and other things. So there’s been uh you know I’ve seen more debate on that and those types of products are are growing in nature because the idea is they really don’t need to be insured. You can just pay for those out of pocket. Mo Most people can. Many people cannot afford to do that, but but many people can. And Cynthia, I would add um yeah, the data on how many people are not using their insurance um is concerning because to me it means we’re not doing a good enough job educating people that no matter what kind of exchange policy they have, they always have annual free meaning to them preventive care and they should be getting their annual exam.
we want them to um and so it’s an opportunity for us to do a better job with the customers we have who are not going in for their annuals. Um the other piece on fraud and claims um in our experience and as you know um we focused on fraud and fraud prevention um and detection and mitigation since day one. Um it’s it’s it’s the it’s it’s always been something that state-based marketplaces um have been mindful of and design our systems to prevent fraud. In our case um use um having certain types of claims um especially in a different state over and over again is a sign that well we may have a a fraudulent enrollment on our hands. is this really a residence? So, we use it just for the opposite. Um, not that people aren’t using their insurance, but if there are certain types of claims and patterns we’re seeing, um, we we we investigate those to see if there is a fraud involved. >> Great. Um, so I’m going to turn next to a question about IKRA. And so for those who are not familiar with IKRA, it’s called individual coverage health reimbursement arrangement. Um, so this is a tax-free employer-funded uh health benefit, but instead of offering a traditional group plan, an employer might give their employees a monthly allowance like a stipen to go buy their own health insurance on the individual market. Um, so I might start with Paul, but pass it to other people too if they want to jump in. Um so how feasible do you think it would be to ever decouple health insurance from employment in the US? Um maybe at a broader scale than what currently is happening um for example through ICRA or maybe some other options that might be out there too. Um and and so the question is asking, you know, basically how likely is it that Americans might ever move away from having a system that is mostly employment based and is IKRA a way to kind of get there? >> Yeah, there’s there’s my answer is different depending upon whether the question is feasible or likely. >> Okay, [laughter] let’s >> because feasible, you know, Congress could just pass a law saying employers aren’t, you know, allowed to offer coverage anymore. I don’t see that happening.
Uh people like me have been hearing from employers for decades about how they would like to move to a defined contribution for health benefits. Uh and I finally give them the means to do that. In some ways I would argue that technology caught up with the concept that employers have been interested in. Uh report came out today from the HA council finding that about a half a million people are in Icarus so far. It’s a very small number, right? And I think Fritz, your slide had what, 150 million people with employment based coverage, right? So that’s correct. We’re talking a drop in the bucket at this point.
I do think, you know, we we came out with a survey a couple weeks ago of employers asking them about their interest in moving to Icaras and the interest was was very strong, right? That doesn’t mean they’re ready to do so. And we’ve seen that before with other new ideas and benefits where the initial hype is off the charts. Um, and the predictions are off the charts. HSAs are an example of that. Uh, and the numbers didn’t materialize as fast as the hype would have expected you uh to see some changes there. But [snorts] it wouldn’t surprise me if employers, especially small employers, start going to RAS uh because they really struggle with paying for the benefit. For large employers, I think it’s going to take one large employer to be first. And for the most part, large employers don’t want to be first when it comes to a major change in benefits, but they also don’t want to be third. So, I think if you had one large employer make a move and got a lot of attention for it, others would be looking at it much more seriously than they’re looking at it now.
Uh and remember health employers offer health benefits for business reasons, recruitment and retainment. And we still have very low unemployment in this country. And as long as employers think they need to offer a benefit to keep workers around, they’re going to do so. >> If if we go into a recession and hit 10% unemployment, then you know, I was predicting the same thing when the ACA passed and employers don’t have to offer health insurance anymore despite the mandate because workers could go to exchanges and get coverage on their own. that didn’t happen. But we haven’t had we other than COVID, we haven’t had a recession since the ACA passed. So that you know that commitment to health benefits hasn’t really been put to the test and the kind of economic environment I think we need to have for employers to back away from their commitment >> and um and then from the individual side and I guess Brian maybe you can touch on this too but like what risks are there with ICRA? um you know does that pose any risk to the individual market like if employers are classing out their you know sicker employees somehow or is that really not much of a risk with the rules that exist?
Well actually there’s some people doing that but [laughter] and we’re trying to resolve that problem. Uh yeah, you certainly don’t want just the sicker people coming over. But the the the issues that come up when we talk about this is just the reality is the individual market really comparable to the group market in the small group. Yes. Uh the benefits are about the same. But you talk a union plan versus what’s an individual market? What options are available? Is it a healthy individual market? Uh where there’s enough people. Also, you have to remember if everybody’s going to the individual market, everybody’s going to be rated based on their age and whether they smoke or not and some of these other factors and which they’re not right now in the large group market. They’re there as a whole group. Everybody gets paid the same. So, all your older employees may not be as excited about that. Uh unless you’re able to also then just differentiate your um subsidy from the employer, how much they’re paying based on age as well. and that gets complicated.
Thanks. Anyone else want to jump in or I can turn into the to the next topic. Um, so I want to do kind of a quick lightning round. Um, you know, keep your answers short, but what do you think are some of the trends in in any of these insurance markets that you’re going to be watching in the next 5 to 10 years? We just hit on, which is one hot topic. I’m curious what other hot topics you guys are following. So, I’m going to do uh I’ll I’ll call on each of you. So Brian, we’ll we’ll start with you. What are you watching? Uh, one of the things we’re watching very closely is the individual market and the enrollment that’s been going down there since the enhanced enrollment uh enhanced subsidies have gone away. But more importantly, we’ve been looking at the small group market. U we’re seeing a in some states a significant decline in number of plans participating uh plan options available, premiums going up. So we’re very concerned there. So that those just the overall health of those two markets we’re going to be tracking very closely. >> Thanks. And I’ll just do a quick plug that at KFF we just did an analysis of small group rate filings where insure many insurers were talking about um risk uh average selection and um small groups moving into level funded plans and that that’s driving up premiums in the ACA small group market. Um and so Fritz, let’s turn to you. What are you watching? >> Yeah, probably a lot of the same things as Brian.
I’ll change it up though. Um, I think the self-insured market is always interesting to watch. Uh, particularly as small groups uh have have started to uh, you know, the smaller the group, the harder it is to, you know, the more fluctuation in your claims. But there are products out there now uh, you know, the self-funded products that are continuing to uh, attract the lower risk, which contributes to that higher risk of the that Brian talked about in the small group uh, ACA market. So, that’s going on. I think on the large group uh self-insured side, it’s a fertile market for a lot of innovation that’s going on as well. Uh the third-party uh tech solutions uh you know they they’re their target markets I guess in a very simple form are payers and then employers. Um so a lot there’s a lot going on in that space in terms of employers really uh trying to hold down costs, improve care delivery uh and you know really give their their their employees the best possible value for the least the least dollar.
Um and a lot of these tech solutions are uh many of them I think are useful. Um some of them are just interesting and some of them are probably a waste of time. Uh, but it’s that market that tends to test out a lot of these uh the these products. So, uh, we’ll see where that goes. >> All right, Paul, what are you watching? >> Uh, I’m watching what’s covered and how it’s covered. In particular, GOP ones. >> Mhm. >> Right. Employers are wrestling with whether or not they should be covering them for weight loss. Uh, and the technology and the pricing is changing quicker than we could keep up with it. And that’s something that I’m very interested in seeing where it goes because that could be a game changer in terms of people’s health and what we ultimately spend on the cost of providing health benefits. >> Ma, >> so um I’m watching HSAs. Paul talked about HSAs in the group market. For us um with HR1, making HSAs um available for anyone in bronze plans um could be very helpful for our customer base. And I’ll just caveat by saying I was not in favor of other provisions of HR1.
Um, I still believe that those other provisions could make it much harder for healthy people to get covered and to stay covered. Um, uh, but in terms of the HSA expansion, um, I am hopeful that at least in DC Health Link, our bronze customers, uh, will take a look at the HSA. We did some number crunching and um for instance, a 60-year-old couple um uh with income just above four times poverty level with a small contribution to an HSA could actually make themselves um uh qualify for the federal health insurance tax credit and save thousands uh per year. Um, and of course with HSAs, it’s HSA. Um, the income is taxfree, it grows taxree, and then you can use it for qualified health expenses taxree. So, I’m really watching that as uh one uh affordability piece that could help a segment of the customer base.
It’s not for everyone, but uh it may help um a segment of the customer base. >> All right. Okay. Well, with our four minutes left, I want to do one more lightning round, but this time imagine that you are kind of brand new to health insurance policy and um and let’s say that you want to get really smart on one thing. Tell me what that one thing is quickly and also where you would go to learn more about it. Um so, I’m going to go in reverse order. We’ll start with Mila, but let’s make this one quick so we have time to wrap up. >> Okay. So, um, I’ve been doing this for a long time and there is no quick way to become smart. I’ve learned I go to other experts to get even smarter. So, my advice is uh make sure you have cell numbers or trusted experts and and experts who can give you different opinions and pros and cons. There is no fixed part of the system without implications for the rest of the system.
It is very complicated patchwork. You fix one thing, you break two other things. So have your cell identify experts and have their cell numbers. Great Paul. Yeah, there there’s no silver bullets here. I think that you know the alliance is a great resource. Tap the resources that are out there. You know, be open-minded to different solutions. Uh because none of this is black and white, right? you really need to dig into the details uh and understand the implications of, you know, what you might be proposing.
Britz, sorry, I went off camera. I was going to try to find a book that was on my shelf, but I must have brought it home, but uh I agree with everybody what everybody else said. If you are looking for a single book to read, there probably isn’t one. Uh but I’ll give you uh one place to start. It’s a book called Ensuring America’s Health. Uh it’s a very good comprehensive overview of how we got health insurance. Uh it looks way back, you know, in into the 1920s30s when it all started. Uh gives you a lot of really good background on why we have what we have today and really helps you understand from the ground up uh what what drives our system. So again, it’s called ensuring America’s health. Excellent, Brian. Yeah, all those are good.
I I to me I think people need to get more familiar with what pooling [laughter] the importance of pooling because a lot of people want to give solutions that’ll fix it for this group of people but you do that you’re going to damage other people you really need to understand how all of these work together uh American Academy of Actuaries society of actuaries they’ve got lots of information I know it’s could be heady but they do a good job of explaining it that how it all works together uh you need to understand that before you start messing around with All right. Thank you so much to all of our panelists. Um Arisi, did you want to make any last comments? Yes. Thank you so much Cynthia, Brian, Fitz, Paul, and Mila um for joining us today for such an important and insightful conversation. And I want to thank all of you who took the time to be here with us today.
We hope you found this discussion informative and that you’ll be able to apply what you’ve learned today in your work. Next slide. Um, we encourage you to stay connected um, with the alliance for our upcoming events and our published resources. We would also love to hear your feedback. So, feel free to take the survey. Actually, we very much encourage it um, for you to take the survey. The QR code is there and the link is also in the chat. Lastly, I want to highlight some of our upcoming educational programming. Um, this September 1st, we’ll be hosting our congressional briefing, MACRA, what’s the 2015 reform got right and wrong and why it matters today. So, we hope that you’ll be able to join us. And this event concludes our series um within the 2026 signature series on healthcare payment.
You can find the registration link in the chat. Um, finally, as a reminder, this webinar and additional materials will be available on the alliance website in the coming days. And that concludes today’s webinar. Um, we look forward to seeing you all at future Alliance events and programming.
