FACT SHEET
The Three Rs of the Private
Health Insurance Market
Risk, Regulation, and Reform
Summary:
The purpose of health insurance is to collectively pool risk to protect individuals from incurring large
expenditures or losses associated with illness, injury or disability. Colorado has two primary types of health
insurance - private and public. In 2011, 66 percent of Coloradans had private health insurance coverage, 18
percent had public coverage, and 16 percent were uninsured.
The private health insurance market is made up of two major components: the individual market insurance that an individual buys from an insurance plan - and employer-sponsored insurance - offered by
companies to their employees. Only about 30 percent of Coloradans have health insurance plans that re
subject to regulation by the Colorado Division of Insurance (DOI).
The federal Affordable Care Act includes a number of provisions aimed at increasing the number of
Americans with health insurance, such as insurance market regulations, subsidies to purchase private
insurance and grants to build health insurance exchanges.
Terms to Know:
Reform:
Adverse Selection: People with a higher- thanaverage health care needs or those at greater risk
of illness are more likely than healthier people to
seek health insurance. Health insurance providers
strive to maintain pools of people whose health,
on average, is the same as that of the general
population. Adverse selection results when the
less healthy people disproportionately enroll in an
insurance plan.
The federal Affordable Care Act includes a number
of provisions aimed at increasing the number of
Americans with health insurance.
Guaranteed Issue: Health insurance coverage
guaranteed for anyone regardless of health status,
occupation, age or gender. Guaranteed issue is
required in Colorado’s small group market (2-50
employees) and business groups of one, but is not
required in the individual market. The ACA includes
guaranteed issue for all markets in 2014.
• Most individuals will be required to purchase
health insurance or pay a tax penalty
•Subsidies to purchase private insurance
•An expansion of public insurance
•Insurance market reforms aim to make health
insurance more affordable and accessible.
The Three Rs of the Private Health Insurance Market: Risk, Regulation, and Reform
Colorado’s Health Insurance Market: A Breakdown
Employer-sponsored Insurance:
The individual market is a health insurance market
with products available for purchase by individuals
without the involvement of an employer sponsor.
Unlike insurance sold in the small group market,
insurers in Colorado can deny individual coverage
based on an individual’s health status.
High-risk pools are a component of the individual
market. CoverColorado is a state plan for Coloradans
with pre-existing conditions who have been denied
health insurance. GettingUSCovered is a federal plan
for people with a pre-existing condition who have
been uninsured for at least six months.
Two types of health insurance coverage are provided
by an employer: fully-funded plans and self-funded
plans.
•Fully-funded (also called fully-insured) plans: The
employer purchases commercial health coverage
from an insurance company and the insurance
company assumes risk for payment of claims. The
insurance plan is regulated by the Colorado Division of Insurance (DOI).
•Self-funded plans (also called self-insured plans):
The employer assumes the risk to pay the claims
from the company’s resources. These plans are
regulated by the federal government under
the Employee’s Retirement Income Security Act
(ERISA).
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CHI is a trusted source of independent and objective health information, data and analysis for the state’s health care
leaders. CHI, celebrating its tenth anniversary in 2012, is funded today by the Caring for Colorado Foundation, Rose
Community Foundation, The Colorado Trust and The Colorado Health Foundation. coloradohealthinstitute.org