Chapter 12

Learning Objectives (part 1 of 2)

Name the basic types of medical insurance policies and describe their features

Describe the different types of managed care programs

Identify the six choices available under Medicare

Distinguish between Medicaid and Medicare

Learning Objectives (part 2 of 2)

Analyze the pros and cons of long-term care insurance

Describe the key features of disability income insurance

Discuss the role of Social Security disability benefits and worker’s compensation as they affect the amount of disability income insurance one should obtain

Basic Types of Medical Insurance Policies Basic Policy Major Medical Policy Indemnity Policy Medigap policy Long-Term Care Policy Group Policy

Basic Policy First Dollar Coverage Covers Initial Expenses Has Upper Limits Example: Hospital-Surgical

Major Medical Designed to pick up where basic

policies leave off Should be purchased in tandem

with a basic policy

Fee-for-Service Policies Both Basic & Major Medical are

known as fee-for-service policies Usually include coinsurance and

deductibles Patient selects physician, pays for

services, submits for reimbursement Insurer pays “reasonable and

customary charges”

Indemnity Policies Do not explicitly cover medical

expenses Pay a fixed dollar rate per day

under specified conditions Examples:

a hospital indemnity policy pays a per diem while in hospital

Specific disease policy

Managed Care Three types of plans

Health Maintenance Organization (HMO) Preferred Provider Organization (PPO) Point-of-Service Plans (POSs)

Two types of HMOs Exclusive HMO (primary care physician) Individual practice HMO (IPA-HMO)

PPO vs. POS Plans PPO is a fee-for-service plan

Patient limited to providers in the PPO’s network

POS provides a primary care physician

Medicare Part of Social Security Benefits Six choices for participation

Original Medicare Plan (OMP) OMP with a Supplemental Insurance Policy Medicare Managed Care Plan Private Fee-for-Service Plan Medicare Medical Savings Account Plan (MSA) Religious Fraternal Benefit Society Plan (RFB)

Original Medicare Plan Part A: Hospital Insurance

Enrollment automatic if entitled to Social Security benefits

Part B: Medical Insurance Individuals must enroll Premium is paid as a reduction in Social

Security benefit Many gaps in Medicare coverage (even

with both parts)

Covering Medicare’s Gaps Retirees should have one or more

of the following policies: Medicare Managed Care Medicare Select Medicaid Medigap Retiree health benefits Long-term care insurance

Medicare Managed Care Plans HMOs for people entitled to Medicare,

four different organizational structures Health Maintenance Organization (HMO) HMO's with Point of Service Option (POS) Provider sponsored Organization (PSO) Preferred Provider Organization (PPO)

Medicaid Jointly funded, Federal-State health

insurance program for specified low-income and needy people

Originally for people eligible for Aid to Families with Dependent Children (AFDC)

Rules vary among states

Long-Term Care Insurance (1 of 2) Covers cost of living in a nursing

home Key elements of a policy

Elimination peroid Maximum lifetime benefit Cost-of-living adjustment (COLA)

Cheaper when younger, but not everyone will need the benefits

Long-Term Care Insurance (2 of 2) Key features to look for in a policy

Make sure daily benefit adequate to cover daily cost in a nursing home

Annual inflation rider (COLA) Make sure benefits last at least 3 years Generous definition of qualification for

nursing home admission Renewable for life & waiver of premiums

Disability Income Insurance At least as important as life insurance Key elements of a policy

Replacement ratio (upper limit 50% to 70%)

Elimination period (2 weeks to 6 months) Duration of benefits (2 years to age 65) Residual rider Guaranteed future insurability

Alternatives to disability income insurance Social Security disability income

Available only to covered workers Six months elimination period Strict rules on definition of disability

Worker’s Compensation Injury will not necessarily occur at

work Even if it does, several exceptions to

quality for coverage