Health care delivery system that combines the delivery of health care and payment of the services

Kaiser Permanente is one of America’s leading health care providers and nonprofit health plans. Our health plan finances the care delivered by the more than physicians of the Permanente Medical Groups, nurses, and 75,000 allied health professionals in our hospitals and medical facilities. We serve people in California, Colorado, the District of Columbia, Georgia, Hawaii, Maryland, Oregon, Virginia, and Washington.

We serve our members using a unique business model that combines health coverage and care delivery into one coordinated experience. Unlike a traditional insurance company, we are a membership-based, prepaid, direct health care system. That means our members — whether they come to us through employer-sponsored or individual coverage, Medicare, or Medicaid — pay dues to access care and services that are coordinated across inpatient and outpatient settings, pharmacy, lab, imaging, and other ancillary services.

The Kaiser Permanente health care delivery system is accountable both to provide the most appropriate and necessary care to each individual, and to serve as a steward of resources on behalf of our entire membership. This accountability aligns incentives to keep people healthy, rather than seeking to generate revenues when they are sick. 

Our approach enables our multispecialty medical groups to practice person-centered, high-quality care that embraces the latest innovations in medicine. Our self-governed medical groups hire and retain highly sought-after physicians and other medical personnel with a payment model that enables them to make decisions with the best interest of the patient in mind. This approach eliminates the pressures that can come from physicians having to manage a business based on the volume of services provided. Instead, Kaiser Permanente physicians are salaried and utilize an evidence-based approach to the practice of medicine, which leads to more effective and efficient care for our patients and members, and better health outcomes.

Integrating evidence-based health care and prepaid financing of coverage the way we do drives coordination of care across all settings and care teams. It enables quality outcomes by ensuring that our members receive the right care, at the right time, in the right setting. We avoid unnecessary costs by eliminating unneeded or duplicate tests or procedures that occur when care is not coordinated. This is a significant factor in keeping our operating costs reasonable.

We’re able to reinvest a significant amount of our operating revenue to continually advance the quality of care we provide. For example, Kaiser Permanente pioneered electronic health records in the 1960s — a cutting-edge, technological undertaking for the organization. We are using the power of that technology today to enable our care teams to provide coordinated, high-quality care for our patients that is seamless across various care settings. We are also able to aggregate anonymized data to understand clinical best practice to innovate care through population health studies. Kaiser Permanente is also at the forefront in the use of telehealth to provide care to our members. We provide convenient care options including email, video, and phone consultations to give our members flexibility in accessing our providers.  

Central to Kaiser Permanente’s business model is a focus that extends beyond our members into the communities where they live, work, and play. We are a leader in recognizing that healthy individuals need healthy communities, and healthy communities need healthy people to thrive. That is why we are working to improve the conditions for health and equity in our communities by addressing the root causes of many chronic health issues, such as economic opportunity, access to quality and nutritious food, affordable housing, safe and supportive schools, and a healthy environment, among the numerous social determinants of health. We invest significantly in the geographies where we operate by supporting community organizations and providing social health resources. Through these efforts we are working to create communities that are among the healthiest in the nation.

Kaiser Permanente, and our model of a nonprofit health plan and hospital system integrated with prepaid multispecialty medical groups, is recognized for the outcomes we achieve in pursuit of our mission: to provide high-quality, affordable health care services and to improve the health of our members and the communities we serve. 
 

Health care is expensive. Health care costs are increasing every year. Without health insurance it would be difficult for most people to afford their health care bills.

Health insurance is a way for people to:

• Protect themselves from extreme financial medical care costs if they become severely ill
• Ensure that they have access to health care when they need it

There are two types of health insurance:

• Taxpayer-funded: funded by federal and state taxes; examples are Medicare, Medicaid and Children’s Health Insurance Program (CHIP)
• Private-funded: provided primarily through employer-sponsored plans; examples are Blue Cross and Blue Shield plans, non-Blue commercial plans, HMOs and self-funded employer plans

Taxpayer-funded health insurers are funded by state and federal taxes. Examples include:

• Medicare
• Medicaid
• CHIP
• Federal/state employee health plans
• Veterans Health Administration (VHA)

Private health insurance is primarily funded through benefits plans provided by employers.

• 160 million individuals are insured through employer-sponsored health insurance
• About 15 million individuals buy health insurance on their own

Examples include:

• Blue Cross and Blue Shield health insurance companies
• Non-Blue commercial health insurance companies
• Health Maintenance Organizations (HMOs)
• Self-funded employer-sponsored benefit plans

To receive health insurance, employees choose to participate in their employer-sponsored plan. They pay a premium. In return, they receive an insurance card that gives them access to the doctors, hospitals and other health care providers that are part of the insurance plan.

Health Insurance Regulations

• States primarily regulate health insurance by setting standards for when and on what terms a state-licensed health insurer must accept an applicant.
• Federal laws also regulate health insurance, including ERISA and HIPAA.
• ERISA establishes national standards for employer- and union-sponsored health plans.
• ERISA prohibits states from regulating self-funded employer- and union-sponsored health plans.
• HIPAA requires private insurers to accept certain people leaving group coverage into the individual market regardless of health status and without exclusion for pre-existing conditions. However, in most states, if eligible people are guaranteed access to coverage in the state's high-risk pool, private insurers are not required to sell coverage to them.

Health insurance makes health care more affordable.

Health insurance helps people pay for health care by combining the risk of high health care costs across a large number of people, permitting them (or employers) to pay a premium based on the average cost of medical care for the group.

Thus, health insurance makes the cost of health care affordable for most people.

Health insurance provides security.

When an individual has an insurance card, it provides easier access to medical care by showing health care providers that most of the individual’s covered treatment costs will be paid.

Employer-sponsored Health Insurance

Most private health insurance is provided through employer-sponsored benefits plans.

Employers decide…

• Whether to offer health benefits
• Level of benefits and the amount of coverage
• Whether to assume the risk and payment for its employees' health care or have the insurance company assume the risk and payment

Employees do this…

• To receive health insurance, employees choose to participate in their employer-sponsored plan.
• They pay a premium that varies based on factors impacting the health care needs of the employee group.
• In return, they receive an insurance card that gives them access to the doctors, hospitals and other health care providers who are part of the insurance plan.

How Health Insurance is Regulated

States generally regulate the business of health insurance. At the same time, a number of federal laws also govern health insurance. We will review two specific federal laws: ERISA and HIPAA.

State Laws:

States set standards covering when and on what terms a state-licensed health insurer must accept an applicant. For example, most states mandate that coverage must be given to small employers that want it. States mandate the extent to which insurers can vary premiums based on health status, claims experience and other factors.

However, states cannot require self-funded employer plans to offer benefits (these plans are governed under ERISA).

States have lists of mandated benefits. Some examples are:

• Fertilization treatments
• Substance abuse treatments
• Breast reconstruction surgery after a mastectomy

Federal Laws:

Employee Retirement Income Security Act of 1974 (ERISA)

• Protects workers from the loss of benefits provided through the workplace
• Establishes national standards for employee benefits maintained by an employer or an employee organization (union)
• Does not regulate insurance provided directly by a private health insurer
• Does not allow states to regulate the content or activities of self-funded employee benefit plans
• Does not allow states to regulate how third parties, including state-licensed health insuring organizations, provide administrative services to self-funded employee benefit plans

Health Insurance Portability and Accountability Act (HIPAA)

HIPAA addresses the concern that:

• People can face lapses in coverage when they change or lose their jobs
• Health coverage providers often exclude benefits for preexisting health conditions for new enrollees

HIPAA requires state-licensed private insurers to accept certain people leaving group health coverage into the individual market regardless of their health status and without any exclusion period for pre-existing medical conditions. However, in most states, if eligible people are guaranteed access to coverage in the state's high-risk pool, private insurers are not required to sell coverage to them.

HIPAA also prohibits state-licensed private insurers from considering the health status of a member when determining the member’s eligibility for group coverage.

To help you better understand health insurance, please view our Health Care Glossary and Health Care FAQs.

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