Health insurance USA

The United States stands for unlimited freedom like no other country. That's why you can expect a few surprises here - especially when it comes to health insurance, which is usually very expensive. Our guide explains the complex system of health insurance in the USA and informs you about your options.

History of health insurance in the USA

When it comes to health insurance, the United States is unique because they are the only industrialized nation without a universal, national health care system. Instead, you'll find a patchwork of different government programs and private providers in America.

A look at history reveals how this particular structure came about:

The Social Security Act

At the beginning of the 20th century, the Great Depression led to a sharp rise in poverty in the USA, so that many Americans could not even afford simple treatments. To counter this, the Social Security Act was passed in the 1930s, aiming to guarantee more security in old age.

The law was extended to health care in 1965 under President Lyndon B. Johnson. From then on, seniors aged 65 years and older and disabled people were covered by Medicare, while low-income populations, in particular, were covered by Medicaid.

All citizens who did not qualify for the government programs had to secure their health coverage independently through private health insurance.

The healthcare reform “Obamacare“

In 2008, nearly 46 million Americans (about 15% of the total population) lacked health insurance. The healthcare reform known as "Obamacare," which completely reorganized access to health insurance, was a milestone for the American healthcare system.

Obamacare primarily included the following changes:

  • Mandatory insurance for all US citizens
  • No exclusion of people with pre-existing conditions by health insurance companies
  • Parents are allowed to cover their children up to age 26
  • A penalty fee of 2% of the household income for not being insured
  • Introduction of state-regulated Obamacare exchanges ("Health Insurance Marketplace")

The reform provided much better access to the system, especially for the socially disadvantaged. President Obama's Affordable Care Act was approved in 2010 and enabled millions of previously uninsured Americans to afford health insurance, partly with government subsidies.

The mandatory insurance introduced in 2014 led to a significant drop in the proportion of people without insurance: in 2018, "only" 28 million Americans were still without health insurance.

Partial rollback by Trump

Although the Affordable Care Act's increasing insurance coverage was evident, the Trump administration was working on an alternative to Obamacare and would have preferred to undo the reform. However, this would have required approval by Congress.

When a new tax law was passed at the end of 2017, however, the penalties for the uninsured were abolished again, which meant that the obligation to provide health insurance no longer existed as of 2019. An important pillar for financing Obamacare thus fell away.

Outlook: What are Joe Biden's plans?

How the insurance market will continue to develop under President Biden currently remains to be seen. However, the Biden administration has identified health care as one of its top priorities.

Joe Biden plans to bring the Affordable Care Act back into focus and build on it. The aim is to reduce healthcare costs, meet the demand for healthcare, and simplify the healthcare system in the USA.

Overview of the US insurance market

Medical care for Americans is provided through several separate insurance systems and is divided between private providers and government programs.

Public health insurance

Only some groups of people have the opportunity to benefit from public health insurance in the United States. At the state level, there are these three programs:

Medicare

Established under the Social Security Act, Medicare is designed to provide health care for elderly and disabled citizens. Any American age 65 or older is eligible for Medicare benefits. Citizens with a recognized disability, or acute kidney failure, are also protected by Medicare.

Medicaid

Medicaid stands for "Medical Assistance" and is a welfare program designed to support children and low-income populations in particular. Since it is a welfare-like benefit, there is a review regarding the level of need before Medicaid can be received.

Tricare & Veterans Administration

Tricare is a health insurance program for members of the US military. Tricare-eligible individuals include military members and their families, National Guard members and their families, survivors, some former spouses, and Medal of Honor recipients and their families.

Private health insurance

The majority of the US population does not qualify for government benefits and must accordingly arrange their own insurance coverage through a private provider.

Private insurance through the employer

Most US citizens are covered by private health insurance through their employer. Group health insurance policies are often taken out for the entire company, with employer and employee sharing the costs.

However, employees frequently have to pay extra for the services they use or take out additional private insurance. Since the employer is the contractual partner for the insurance coverage, the health insurance usually also ends when the employee loses their job.

Individual private insurance & Marketplace

Since the introduction of "Obamacare," people who have to look for private health insurance on their own – without the support of an employer – can find and purchase suitable insurance coverage through the US government's Marketplace.

Depending on one's region of residence, there are different types of insurance designed to meet different needs. When buying health insurance, you can usually choose between the following three types:

  • Traditional "fee-for-service" health insurance: usually the most expensive option but offers the most flexibility in choosing providers (free choice of doctors)
  • Health Maintenance Organizations (HMO): a network that employs its own physicians as contractors; members pay a fixed monthly fee and can only see physicians in the network
  • Preferred Provider Organizations (PPO): a network of physicians and hospitals; members can go to out-of-network physicians if they pay their own share of the costs
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Healthcare costs in the USA

In general, medical care in the USA is of a high standard. There are a large number of private clinics with modern equipment and state-of-the-art technology. However, the health care costs in the USA are among the highest in the world.

Why are the costs so high?

A number of factors are driving up health care costs in the United States:

Unhealthy diet

Burgers, soft drinks, sweets: Many Americans maintain an unhealthy diet. The Centers for Disease Control and Prevention (CDC) states that over 42% of American adults are obese. The associated health risks increase costs to the healthcare system.

Delayed treatments

Many uninsured or insufficiently insured Americans avoid non-essential doctor visits. As a result, illnesses often go undetected or are not treated in a timely manner, which in turn leads to high treatment costs in the long term.

High drug prices

Drug prices in the United States are extremely high. Americans pay more than twice as much for prescription drugs as citizens of other industrialized nations.

Potential lawsuits

American clinics calculate possible lawsuits for compensation payments into their pricing. Since each clinic can determine its own prices, it sometimes happens that simple handkerchiefs or plastic cups become a "luxury item."

Consequences of high costs

Due to high healthcare costs, insurance premiums in the USA are very expensive. As a result, some of the population cannot afford health insurance or can afford it only with difficulty.

Many US citizens choose insurance that frequently does not cover all costs, so that they have to pay or co-pay for medical services themselves in some cases. Around 29 million Americans even have no health insurance at all.

American legislation guarantees that hospitals must care for everyone in medical emergencies. However, uninsured Americans are generally expected to pay for their own medical care in the event of illness. Not surprisingly, the most common reason for personal insolvency involves medical bills following hospitalization.

An example: In New York, treating a US expatriate for 42 days in intensive care with artificial ventilation costs about €477,817. At the rates applicable in Germany, a hospital receives €29,203 for the same treatment.

The US health insurance in in comparison

While the state regulates and ensures the health care of its citizens in most Western industrialized nations, individual initiative is necessary in the United States!

For example, health insurance in the US differs greatly from that in European countries. Let's take a look at the most important features of the US health insurance system in comparison to the German system:

  Germany USA
System Based on the social state Hardly any interference by the state, insurance market determined by economic interests and competition
Organisation Public or private Mainly private, state insurance only available for seniors and people in need
Financing Social security contributions for employees and employers Self-pay, possibly co-payments by employer or state subsidies
Special features Limited range of services, cost increases due to demographic change, co-payments for dental treatment High number of uninsured people, partially limited choice of doctors, high drug prices and treatment costs, health insurance coverage tied to the workplace

Health insurance for travelers

USA travelers can also see a doctor at short notice in the event of illness or visit the Emergency Room in emergencies. It is highly advisable to obtain private international travel insurance before the trip because medical treatment in the United States can be very costly.

Any treatment costs, rescue costs, or transport costs back to your home country usually have to be paid on the spot. The public health insurance companies do not cover these costs, but travel health insurance companies will reimburse the money. Therefore, always get a detailed receipt that includes all costs and treatments as well as the diagnosis codes.

When you purchase travel insurance for the USA, make sure it best includes the following services:

  • outpatient and inpatient treatments
  • operations
  • medication and auxiliary means
  • dental treatments
  • repair of dentures, if necessary
  • transport to a hospital
  • rescue and recovery
  • return transport to home country

Health insurance for immigrants

The choice of suitable health insurance is an important point for all USA emigrants. It is advisable to initially purchase long-term international travel health insurance for the first months in the new home country.

On-site, you will then have time to check all insurance options carefully. You should check the different policies thoroughly, as they consist of different packages and often do not include dental services, for example.

When comparing insurance conditions, ask yourself the following questions:

  • Do I have the right to freely choose my doctor, hospital, or pharmacy?
  • Is treatment by specialists (such as ophthalmologists and dentists) covered?
  • Does the insurance cover special treatments such as prenatal care, physiotherapy, or psychiatric care?
  • Are home health care or nursing home costs part of the coverage?
  • Does the insurance cover any medications that doctors may prescribe for me?
  • What are the deductibles and co-payments?
  • What is the maximum amount I must pay myself to cover expenses?
  • Am I also covered during a temporary or long-term stay in my home country?

Keeping state health insurance

If you were enrolled in public health insurance in your home country, you usually cannot continue with the same insurance in the USA. If you come from an EU country, for example, you automatically lose your insurance coverage when you leave the European social security system.

However, in Germany, for example, it is possible to maintain a so-called "Anwartschaftsversicherung" with the public health insurance, so that your coverage is temporarily inactive, and can be resumed under the old conditions when you return to Germany.

Keeping private health insurance

There are also many reasons for taking out private health insurance in your home country. German insurance law, for example, offers some significantly better conditions compared to the USA.

Thus, people insured through a German private health insurance company in the US continue to be subject to the German Insurance Contract Act, which governs all providers and insurance companies in Germany.

Beratung zur Krankenversicherung

Buying an international health insurance policy

With international health insurance, the insurance benefits remain as uncomplicated as you are used to at home. In addition, you avoid unnecessary co-payments. You can find offers for health insurance coverage that meet your needs, for example, at our partner PassportCard.

PassportCard offers you a choice of three different rates – depending on your individual needs. However, the following benefits are included in all packages:

  • Global protection: Your insurance coverage is not only valid for the USA but worldwide – even for all stays in your home country.
  • No prepayment: You can pay conveniently and without prepayment with the PassportCard.
  • Strong network: In the USA, you are billed through the United Healthcare network (the strongest and highest quality healthcare network in the US) or ESI pharmacies.
  • Transparency: You will only be charged a share of the cost for treatments outside the United Healthcare network, as well as for scheduled dental treatments.
  • Service round the clock: PassportCard employees are available 24/7 in German and English (no call center).
  • Telemedicine: You can receive medical advice around the clock via video call. This way, you will also receive legally compliant prescriptions for the USA.

Do you have more questions? The PassportCard team will be happy to help you find the right insurance:

Health insurance for students

The land of opportunity is known for its outstanding academic facilities. If you are planning a temporary yet long-term stay in the USA (e.g., study, internship, au pair stay), you should also make sure you have sufficient health insurance coverage abroad.

For studies or other longer stays in the USA, special travel insurance policies can be purchased for a period of up to 5 years. Make sure that important benefits such as costs for medical treatment, medication, a hospital stay, transportation costs, etc., are covered.

Health insurance for retirees

Retirees who want to move to the USA should inform themselves about the topic of health insurance well in advance of their departure in order to avoid possible high medical costs. Citizens of European countries who stay outside the EU, for example, lose the protection provided by the public health insurance of their home country and should therefore obtain an international health insurance policy.

There are two options: you can either fight your way through the jungle of offers by the many American providers of private health insurance, or you can take out a long-term international health insurance policy for seniors back in your home country. The latter is usually valid for a certain period of time (usually one year, at most five years) and must be purchased again for a longer stay or for the next stay in the USA.

More tips for the USA

Everyday life in the USA can be full of surprises and challenges. However, with our guides, you will be well prepared for your new life in the States! Learn more about the school system, tax system, driving, or naturalization in the USA.

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