Describe the three methods for categorizing health insurance in the United States.

What will be an ideal response?

• The first method categorizes health insurance according to the combination of products. The principle insurance vehicles that provide benefits associated with ill health are as follows:
• Basic employee benefits, including medical, dental, vision, and prescription drug coverage.
• Disability insurance, including short- and long-term insurance and compulsory temporary disability insurance.
• Workers’ Compensation.
• The second method for categorizing health insurance is by the type of organization sponsoring coverage. The organizations that sponsor health insurance coverage include the for-profit insurance carriers, the Blue Cross and Blue Shield plans, health maintenance organizations, unions, and employers that self-fund or partially self-fund employee benefits.
• The third method for categorizing health insurance is by funding mechanism. The three different funding mechanisms include the following:
• Full insurance: With 100 percent self-funding, employers choose some organization to administer their medical benefits program and perform claim adjudication. Thus, the employer pays two types of employee benefit expenses: (1) medical service claim expenses submitted to the administrator for reimbursement and (2) an administrative fee.
• Partial insurance: The most common type of partial funding is the “minimum premium plan” that allows the employer to self-fund claim expenses up to a certain predetermined maximum. Once the maximum amount is reached, an insured policy assumes financial liability. Another variant of self-funding involves the purchase of stop-loss insurance for individuals who exceed their maximum of out-of-pocket payments.
• Self-insurance: Self-funding allows the employer to avoid the risk of charges, profits paid to the insurer and rolled into the premium, and other administrative fees. Additionally, because self-funding is technically not insurance, employers can avoid the taxes assessed by states on premium revenue.