Get the facts: How does health care work?

You might be surprised to learn that it’s likely not your health insurer deciding what care is covered by your plan.

Health insurers are just one of several “payers” in our health care system. Employers as well as federal and state governments also serve as payers and are often referred to as the plan sponsor. These plan sponsors are responsible for designing the health plans that the majority of Americans are enrolled in and determining what care and services will be covered.

Take employer-sponsored plans. About 165 million Americans are enrolled¹ in these types of plans, and 65% of them are enrolled in what’s called a self-insured plan. For employers that choose to self-insure their benefits, the health insurance company they select provides administrative services such as handling calls from members and paying claims. But as the phrase “self-insured” suggests, it’s the employer’s funds that cover claims payments.

Self-insured employers can design their health plans and determine what will and won’t be covered for their employees. So if you’re enrolled in a self-insured employer plan and there’s something you don’t like about your plan, whether it’s the premium, your out-of-pocket costs or the care that’s covered, it’s important to remember that your health insurer probably isn’t the one that designed it that way. Your employer did.

Employers that choose to fully insure their health benefits don’t have as much flexibility to custom design their plans, but they’re still typically presented with a set of options from their health insurer and can choose the plan they feel best meets their employees’ needs. 

It works much the same way with government-sponsored plans. The Centers for Medicare & Medicaid Services (CMS) is the plan sponsor for Medicare plans and issues coverage mandates that all plans must abide by. That’s why Medicare Advantage plans cover the services that Original Medicare does, but health insurers that offer these plans also have flexibility to cover extra benefits such as gym memberships, dental, hearing, transportation and food benefits that aren’t covered by Original Medicare.

For Medicaid and individual exchange plans, both CMS and individual states stipulate what care must be covered.

Another important factor that influences the design of health plans is just how heavily regulated the health insurance industry is. A series of laws applies to all types of health plans, setting minimum standards for coverage, affordability and access. Your plan sponsor has an obligation to abide by these laws when designing its health plans, and your health insurer is legally responsible for upholding the plan design.

Here are a couple examples of how this all works in practice:

• To accommodate the unique benefit decisions of the thousands of employer customers it serves, UnitedHealthcare Employer & Individual offers more than 74,000 health plans. Last year alone, the company established more than 30,000 unique customer benefit plans, each with its own coverage parameters.
• Every spring, health insurers are required to submit “bids” for each Medicare Advantage plan they’d like to offer the following year to CMS for approval. So, if you’re enrolled in a Medicare Advantage plan, the federal government approved its design and benefits last year.