Health Insurance

B

Outpatient Care

Patients who do not require an overnight hospital stay receive outpatient care, which is generally covered by comprehensive policies. Outpatient care could be provided in a doctor’s office, a neighborhood clinic, or in a hospital if the patient is sent home the same day. For example, patients often will come to the hospital the day before surgery so that doctors can perform blood tests. Simple surgeries like a tonsillectomy (a procedure to remove the tonsils) usually can be performed on an outpatient basis. Even very sophisticated surgeries like a cochlear implant (a device used to stimulate the auditory nerve in deaf people) often do not require a hospital stay. To encourage patients to make cost-effective use of the healthcare system, health insurance plans—particularly managed care plans—often include financial incentives to use outpatient services whenever possible.

Treatment of mental illness is commonly performed on an outpatient basis, but insurance coverage is often limited for such services as psychotherapy. For example, private insurers generally pay 80 percent of the cost of most outpatient medical services, but they traditionally limit reimbursement for psychotherapy to 50 percent or less of its cost. Also, many insurers limit their coverage of psychotherapy to a specified maximum dollar amount or to a maximum number of visits.

Many insurance policies will offer coverage of healthcare performed in the patient’s home by an approved medical provider. Home healthcare benefits are generally limited to medically necessary services that are part of a treatment plan prescribed by the patient’s doctor. Some policies also cover hospice care that allows a terminally ill patient to receive healthcare services at home or in an approved hospice center instead of in a hospital.

C

Emergency Care

Most insurance policies cover emergency care provided in hospital emergency departments, but they generally discourage overuse of emergency room visits by requiring the patient to make a copayment. Health insurance policies also usually offer limited coverage for ambulance transportation to emergency rooms.

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D

Substance Abuse and Alcoholism Treatment

Most comprehensive policies offer limited coverage for treatment of alcoholism and other forms of substance abuse. These policies generally pay a percentage of the cost for treatment performed by an approved facility or counselor, but benefits are usually limited to a maximum amount paid over a specified period.

E

Alternative Medicine

An increasing number of health insurance policies provide benefits for so-called alternative medicine—that is, for therapeutic practices and treatments that lie outside the mainstream of Western medical care. Policies that cover alternative medicine may provide benefits for such treatments as acupuncture, chiropractic care, therapeutic massage, and naturopathy (treatments that avoid drugs and surgery in favor of natural remedies). Advocates of alternative medical practices believe that they can provide safe, natural approaches to treating illnesses or injuries that conventional medicine has had limited success in curing, such as chronic pain and drug addiction.

X

History in the United States

Health insurance in the United States is a relatively new phenomenon, dating to the time of the Civil War (1861-1865). Early forms of health insurance mainly offered coverage against accidents arising from travel, especially by rail and steamboat. The success of accident insurance paved the way for the first insurance plans covering illness and injury. The first insurance against sickness was offered by Massachusetts Health Insurance of Boston in 1847. Insurance companies issued the first individual policies offering disability insurance in 1890.

The first modern group health insurance policy was issued in 1929, when a group of teachers in Dallas, Texas, contracted with Baylor Hospital for room, board, and medical services as needed in exchange for a monthly fee. Many life insurance companies entered the health insurance field in the 1930s and 1940s, and the popularity of health insurance grew quickly. In 1932 nonprofit organizations called Blue Cross or Blue Shield first began to offer policies of group health insurance. Blue Cross and Blue Shield were the first programs that established contracts directly with healthcare providers, who would then offer services to subscribers at reduced rates. Originally, Blue Cross plans covered the cost of hospital care, whereas Blue Shield plans covered doctors’ bills. Eventually, however, both Blue Cross and Blue Shield plans began covering all healthcare services.

Employee benefit plans became a widespread source of health insurance in the 1940s and 1950s. Increased union membership at U.S. factories enabled union leaders to bargain for better benefit packages, including tax-free, employer-sponsored health insurance. Wage freezes imposed during World War II (1939-1945) also drove the growth of employee benefit plans. Unable by law to attract scarce workers by increasing wages, employers instead enhanced their benefit packages to include healthcare coverage.

Government programs to cover healthcare costs began to expand during the 1950s and 1960s. Disability benefits were included in social security coverage for the first time in 1954. When the government first implemented Medicare and Medicaid programs in 1965, private sources paid 75 percent of healthcare costs in the United States. By 1995 that number had dropped to only 53.8 percent.

Throughout most of the 1980s and 1990s the majority of employer-sponsored group insurance plans switched from fee-for-service plans to managed care plans. As a result, most Americans with health insurance were enrolled in managed care plans by the mid-1990s. For example, in 1980 only 9.1 million Americans were enrolled in health maintenance organizations. By 1995 that figure had risen to 46.2 million. Employers made the change to managed care as part of an effort to improve the quality of healthcare for their employees while also monitoring the cost of providing insurance.

In 1993 President Bill Clinton presented to the U.S. Congress a healthcare reform plan that would guarantee health insurance for all Americans. Under the leadership of the president’s wife, Hillary Rodham Clinton, the Democratic Clinton administration’s special commission on healthcare reform claimed that in addition to providing universal health insurance, the proposal would stem the rapidly rising cost of healthcare. Republican leaders in Congress fiercely opposed the plan for being too expensive and for imposing excessive governmental regulations on healthcare. Opponents of the plan also attacked it for restricting patient choice of healthcare providers and for placing an undue burden on small businesses by forcing them to provide health insurance for their employees. In 1994 members of Congress introduced a variety of alternative proposals, but the administration never reached a compromise with Republicans, and Clinton’s healthcare reform package never became law.

In 1996 Congress passed the Mental Health Parity Act, a law that requires employers with more than 50 workers to offer health plans that set yearly and lifetime limits for mental health care at the same level as limits for physical health care. Despite these important safeguards for workers, the law allows employers in some states to eliminate coverage of services to treat mental illness altogether. Also, the law allows employer-sponsored plans to charge higher deductibles and copayments to workers seeking mental health care.

Congress also passed the Health Insurance Portability and Accountability Act in 1996. This legislation extends the basic provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA) by further protecting individuals from losing their health insurance when they move from one job to another, become self-employed, or have preexisting medical conditions. However, the Health Insurance Portability Act does little to ensure the overall quality or comprehensiveness of insurance offered by employers. In 2003 Congress added a prescription drug benefit to the Medicare program. In 2008 Congress passed the Genetic Information Nondiscrimination Act, prohibiting health insurance companies from discriminating against individuals because genetic testing revealed that they were at risk for contracting certain diseases or conditions.