Who Pays for Healthcare in Indiana?

A single insurance card doesn’t always show who is paying the bill. Employers, insurers, government programs and residents themselves may each play a role in financing the same claim. The financial question is who actually pays, how that responsibility is divided, and why it matters.

Episode 3 showed that a Hoosier navigating rural Indiana’s healthcare network doesn’t see the financial arrangements behind their care, only whether it’s available, close and affordable. But those funding arrangements are what make that care possible. So, when a Hoosier receives healthcare, who actually pays for it?

The short answer is that a single medical bill is rarely financed by just one entity, and the name on the card is often only one link in that chain. An employer may fund the medical claims behind a familiar insurer’s logo. The federal government may finance the coverage while a private health plan pays the provider. Indiana and the federal government may split the cost of a claim. And if care follows a car accident or a workplace injury, an entirely different kind of coverage may become responsible instead.

What a Hoosier Actually Pays

Long before care is needed, most Hoosiers already feel the cost directly. Someone with employer coverage may see a premium come out of every paycheck. Someone buying coverage on their own pays that premium directly, sometimes with help from a federal tax credit. Once care is used, a deductible, copay or coinsurance amount often follows, and going out of network or receiving services that are not covered can raise that cost further. The Hoosier pays part of the cost, but usually not all of it. The next question is who pays for the rest.

Employer-Sponsored Coverage

From the employee’s perspective, employer coverage may look straightforward. A premium contribution comes out of the paycheck, an insurance card arrives and the resident uses a network. But two similar cards can represent very different financing.

Under a fully insured plan, a small or large-group employer pays the insurance company a monthly premium per employee, and the insurer becomes financially responsible for covered claims. Under a self-funded plan, the employer funds those claims itself, even though an insurance company or third-party administrator, or TPA, may still process the claims and provide the network.

The difference matters more in Indiana than in most states. Preliminary 2025 data shows that 74.2% of Indiana private-sector employees enrolled in employer coverage and 79.0% of enrollees at firms with 50 or more employees were in a self-funded plan. That means a large share of coverage in Indiana is really employer money moving through a TPA.

Self-funding isn’t only for large companies. A Multiple Employer Welfare Arrangement, or MEWA, lets several unrelated small employers pool together to offer a health plan. The pool can either self-fund or buy as fully insured coverage. A self-funded MEWA, like a self-funded employer, typically relies on a TPA to process claims. One example in Indiana is a members only small-business health pool sponsored by the Indiana Chamber of Commerce which covers an estimated 1,500 small businesses and 12,500 employees across the state.

Small businesses can also buy coverage through the Small Business Health Options Program, or SHOP, essentially a small-group version of a fully insured plan. Alternatively, employers can choose to offer a Custom Health Option and Individual Care Expense, or CHOICE Arrangement, previously known as an ICHRA, by contributing a fixed amount toward each employee’s own individual-market policy instead. CMS and the SBA chose Indiana for the CHOICE Arrangement’s national rename announcement in September 2026, citing the state’s 2024 law creating the nation’s first tax credit for small businesses offering this kind of coverage.

That gap, between who is paying and what is being purchased, is exactly the kind of distinction Finance should track, since it decides what the business is exposed to. A SHOP or fully insured premium is fixed no matter how much care employees use, a self-funded plan ties cost directly to what they use, and a CHOICE contribution is capped at whatever the employer sets.

But none of this applies without an employer plan in the picture. What happens when there’s no employer, the job doesn’t offer coverage, or there is a change in income?

When Life Changes, Medicaid Steps In 

For some Hoosiers, a change in circumstances may lead to Medicaid. Medicaid eligibility depends on income, household size, age, pregnancy, disability and other program rules that vary by population.

Indiana Medicaid is jointly financed by the state and federal government, and the split matters whenever two or more payers share a bill. In state fiscal year 2026, Indiana Medicaid spending totaled about $19.7 billion. Federal funds covered roughly 68% of that total, Indiana’s General Fund covered about $4.5 billion, or roughly 23%, and the remaining share, about 9%, came from other non-federal sources such as provider assessments and intergovernmental transfers.

Indiana delivers much of Medicaid through managed care, paying managed care organizations, or MCOs a fixed monthly amount per member to administer covered benefits. Other Medicaid payments can flow through separate supplemental arrangements. For Finance, if an MCO’s costs run higher than what it’s paid, the MCO itself generally absorbs the difference, becoming a third payer alongside Indiana and the federal government.

Individual-Market Coverage 

Turning 65 Isn’t the Only Way In

Coverage also changes with age, regardless of employment. Medicare generally starts at 65, though some Hoosiers qualify earlier because of a disability or kidney failure. Original Medicare is funded by a mix of sources. Part A, or Hospital Insurance, is financed primarily through payroll taxes paid by employees, employers and self-employed workers. Part B, or Medical Insurance, and Part D, or Prescription Drug Coverage, are financed mainly through federal general revenues authorized by Congress and premiums paid by Medicare beneficiaries.

A resident can stay in Original Medicare, which uses Medicare Administrative Contractors, or MACs, to process fee-for-service claims on behalf of CMS or choose a different product. Original Medicare alone leaves deductibles and coinsurance uncapped, with no limit on how high out-of-pocket costs can climb in a year.

A Hoosier can address that gap in two different ways, and in both, a private insurer becomes a second payer alongside Original Medicare. Medicare Supplement, known as Medigap, is private coverage a resident can buy separately specifically to cover the deductibles and coinsurance Original Medicare leaves behind. Original Medicare pays its share first, and the Medigap insurer pays the rest.

Medicare Advantage works differently. It replaces Original Medicare entirely with a private health plan that caps how much a member pays out of pocket in a year, and often bundles in benefits such as dental, vision or hearing that Original Medicare doesn’t cover. CMS pays a private health plan to provide Medicare-covered benefits, and the insurer then pays the provider. If the cost of that member’s care runs higher than what CMS paid, the insurer itself absorbs the difference.

Some Hoosiers qualify for both Medicaid and Medicare at once, typically because low income qualifies them for Medicaid while age or a disability qualifies them for Medicare. For them, a Dual-Eligible Special Needs Plan, or D-SNP, is a type of Medicare Advantage plan built specifically to coordinate the two, with Medicare generally paying for most medical care and Medicaid covering much of what Medicare leaves behind, including long-term care.

Some employers and unions also sponsor Medicare coverage for retirees through an Employer Group Waiver Plan, or EGWP, which is one more way an employer can stay part of a Hoosier’s healthcare financing long after active employment ends.

Military service is another path to coverage, independent of age or employment. TRICARE, funded by the Department of Defense, covers active-duty service members, retirees and their families. For retirees 65 and older, a companion program called TRICARE For Life works alongside Original Medicare, with Medicare generally paying first and TRICARE For Life paying second for services covered by both programs.

Sometimes the Reason for Care Changes the Payer

Most healthcare starts with health coverage, but not all of it stays there. Workers’ compensation is the clearest example. If an injury or illness is work-related, the employer-funded workers’ compensation program is generally responsible for the medical care and other benefits that follow.

Auto and liability coverage can do something similar. Medical costs from a covered accident may be paid, in whole or in part, by auto medical or liability coverage rather than health insurance, depending on the policy and who is at fault. Supplemental accident, critical illness and travel medical coverage can layer in as well, though these generally pay a specified benefit rather than replace major medical coverage.

And when none of these apply, and the resident has no health coverage, the resident becomes the direct payer.

One Organization, Potentially Several Roles

Indiana’s healthcare dollars may flow through a mix of employers, insurers, TPAs and government before making their way to providers that deliver the care. Understanding which role or roles an organization plays in this flow matters.

In employer-sponsored coverage, the employer is typically one of the funding sources. In the case of a self-funded plan, it is also the claim payor, which means understanding its employee base and plan participation, in addition to the medical cost. A TPA or MAC may process claims and perform administrative functions for a fee, without funding the medical claim itself. That fee may move with enrollment, which can be impacted by government policy or business changes.

All of this ultimately impacts who gets the healthcare dollar, the provider. Regardless of where the dollar comes from, the provider’s revenue depends on its full payer mix, the blend of these sources across every resident it treats. A shift in any one of them changes what that provider collects, even if nothing about its own cost changes at all.

Whatever the mix, Finance should know who it depends on to get paid or to pay others and which role or roles the organization plays, and revisit that whenever a contract, policy or plan design changes. Few places are seeing all three kinds of change at once the way Indiana Medicaid is right now.

Episode 5 follows Indiana Medicaid, looking at how eligibility and enrollment are changing and what’s at stake in the state’s new Medicaid managed care bid.

Sources

KFF State Health Facts, based on Agency for Healthcare Research and Quality MEPS-IC. Share of Private-Sector Enrollees Enrolled in Self-Insured Plans. Period: 2025 preliminary data.

Indiana Family and Social Services Administration. SFY26 Q4 Quarterly Financial Review. Period: Presented August 5, 2026.

Centers for Medicare & Medicaid Services and U.S. Small Business Administration. CMS, SBA, and Georgia Recognize Innovative CHOICE Arrangements as Major Win for Small Businesses. Period: September 14, 2026.

Indiana Department of Revenue. Income Tax Information Bulletin #122: Health Reimbursement Arrangement Tax Credit. Period: Tax years beginning in 2024.

U.S. Department of Labor, Employee Benefits Security Administration. Multiple Employer Welfare Arrangements under ERISA: A Guide to Federal and State Regulation. Period: Current guidance.