Health, Disability and Long Term Care Insurance

7/22/2019 Health, Disability and Long Term Care Insurance

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Chapter 11Health Disability and Long-termCare Insurance

McGraw-Hill/IrwinCopyri ght 2012 by The McGraw-H il l Companies, Inc. Al l r ights reserved.

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Chapter 11

Learning Objectives1. Explain why the costs of health insurance and

health care have been increasing

2. Define health insurance and disability incomeinsurance and explain their importance in financial

planning3. Analyze the benefits and limitations of the various

types of health care coverage4. Evaluate private sources of health insurance and

health care

5. Appraise the sources of government health careprograms

6. Recognize the need for disability income

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Health Care Costs

Object ive 1:Explain why costs of health insuranceand health care have been increasing

The US has the highest per capita medicalexpenditures of any industrialized country in theworld

$13,375 health care costs per person in 2009

This amount is twice as much spent on health careas the average for the 24 industrialized countries inEurope and North America

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Health Care Costs(continued)

Medical expenditures were 6% of the GDP in1965, but rose to 13.6 of our GDP in 1997 andfurther increased to 17.3 in 2008. This isexpected to continue growing to 20% in the

next 6 years.

High administrative costs

11% of health care dollar vs. 1% in Canada

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Health Care Reform

Patient Protection and Affordable Care Act-3/23/10

Health Care and Education Reconciliation Act-3/30/10 The Obama Administration believe that the health care reform

provided in the above Acts will:

Reduce long-term growth of health care costs

Protect families from bankruptcy or debt due to health carecosts

Guarantee choice of doctors and health plans

Invest in prevention and wellness

Improve patient safety and quality of care

Assure affordable, quality health coverage for all Americans

Maintain coverage upon losing or changing jobs.

Eliminate barriers due to pre-existing medical conditions

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Health Care Costs (continued)

WHY DOES HEALTH CARE COST SO MUCH? Use of sophisticated, expensive technologies

Duplication of tests and technologies

Increases in the variety and frequency of treatments

Increasing number and longevity of elderly people

Regulations that result in cost shifting rather than costreduction

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Health Care Costs (continued)WHY DOES HEALTH CARE COST SO MUCH?

(continued) Increasing number of accidents, crimes that require emergency

services

Limited competition, restrictive work rules in the health caredelivery system

Labor intensiveness, rapid earnings growth for health careprofessionals

Innovative treatments for AIDS, cancer

Built in inflation in health care delivery system

Malpractice Insurance

Aging baby boomers

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Health Care Costs(continued)

WHAT IS BEING DONE ABOUT THE HIGH COSTSOF HEALTH CARE?

Careful review of fees and charges

Establish incentives for...

Preventive care

Services provided out of the hospital where medicallyacceptable

Involve community in balancing health care needs, healthcare resources

Encourage prepaid group practices

Support community health education programs so peopletake better care of themselves 11-8


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WHAT CAN YOU DO TO REDUCE PERSONALHEALTH CARE COSTS?

Consider participating in a flexible spending account.

Consider a high-deductible health plan

Ask for less expensive generic drugs

Use a mail-order or on-line pharmacy for long term drugs

Review free or low-cost coverage for uninsured children

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WHAT CAN YOU DO TO REDUCE PERSONALHEALTH CARE COSTS?

Review state plans for prescription drug assistance

Review follow-up procedures with doctor Investigate non-urgent procedure

Review billing statements for errors

Appeal unfair decisions by your health plan

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WHAT CAN YOU DO TO REDUCE PERSONALHEALTH CARE COSTS? (continued)

Stay well - focus on prevention

Eat a balanced diet, keep your weight under control

Avoid smoking, dont drink to excess

Get enough rest, relaxation, and exercise

Drive carefully, watch out for accident and fire

hazards in the home

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Health Insurance andFinancial Planning

Object ive 2:Define health insurance anddisability income insurance and explain theirimportance in financial planning

Over 45 million Americans have no health

insurance An older student population is not covered by their

familys policy. 40% are older than age 25

Health insurance limits the financial burdens peoplesuffer due to illness or injury

Its part of your overall risk management plan tosafeguard your familys economic security

Disability income insurance protects your mostvaluable asset - your ability to earn an income

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Health Insurance andFinancial Planning (continued)

GROUP HEALTH INSURANCE

Group plans comprise more than 90% of all healthinsurance

Most group plans are employer sponsored;employer pays part or most of the cost

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GROUP HEALTH INSURANCE (continued)

1996 Health Insurance Portability andAccountability Act provides federal portabilitystandards, nondiscrimination in health insurance,and guaranteed renewability

If you changes jobs you need not lose yourhealth insurance

Individual insurance is also available

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You can supplement your group policy

The coordination of benefits provision in apolicy says that benefits received from all

sources are limited to 100% of allowablemedical expenses

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COBRA requires many employers to offer employeesand dependents the option to continue their groupcoverage for a set period of time following a divorce

The American Recovery and Reinvestment Act of 2009

(part of the governments economic stimulus package) Requires employers to provide health insurance to

employees terminated between 9/1/08 and 12/31/09.

Employees pay 35% of the premium.

Employer subsidizes 65% of the premium for up to 9months in exchange for a tax credit.


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A Good Health Insurance Plan Should..

Offer basic coverage for hospital and doctor bills. Cover at least 120days hospital room and board.

Provide at least $1,000,000 lifetime maximum foreach family member.

Pay at least 80% of out-of-hospital expenses afteryearly deductible of $500-$1,000/person is met .

Impose no unreasonable exclusions.

Limit your out-of-pocket expenses to no more than$3,000 to $5,000 in a year, excluding dental,optical, and prescription costs.

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Types of Health InsuranceCoverage

Object ive 3:Analyze the benefits andlimitations of the various types of health carecoverage

TYPES OF MEDICAL COVERAGE

Hospital expense insurance- Hospital room and board and other charges

Surgical expense insurance- Surgeon's fee for an operation

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Types of Health InsuranceCoverage

TYPES OF MEDICAL COVERAGE (continued)

Physician expense insurance

- Pays for physicians care such as officevisits, lab tests and X-rays. It does notinclude surgery.

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Types of Health Insurance Coverage

(continued)

Major medical expense insurance

Covers expenses for a serious injury or long-term illness. Has a deductible, coinsurance,

and a stop-loss provision

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Types of Health Insurance Coverage

(continued)

Comprehensive major medical insurance

Low deductible offered without a separate, basic

plan. Covers hospital, surgical, and other bills Dread disease and cancer insurance policies

Focus on unrealistic fears, and only pays out forvery specific conditions. Often sold by people

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Types of Health Care Coverage(continued)

Hospital indemnity

Pays a fixed amount for each day you are in ahospital. Best for people in high-risk groups

Dental expense insurance

Covers exams, cleaning, x-rays, fillings, rootcanals, and oral surgery

Vision care

Exams, contact lenses, and glasses

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Long term care insurance

Virtually unknown 35 years ago

Growing faster than any other form of insurance

In 2010, estimated that 9 million men and womenover 65 years old will need long term care

insurance

Long term care insurance can be very expensive

National Average: 1 year in nursing home=$72,000

Premiums $1,000 to $16,000 per year11-23


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MAJOR PROVISIONS IN A HEALTH INSURANCE POLICY

Eligibility Varies with age, marital status, and dependency

Assigned benefits Insurance pays your doctor or hospital directly

Internal limits Fixed amount per day for a hospital room

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MAJOR PROVISIONS IN A HEALTH INSURANCE POLICY

Co-payment Cost sharing in the form of a flat dollar amount

you pay, such as $15.00-$30.00 per office visit or$10.00-$25.00 per prescription

Service benefits vs. fixed $ amount

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Benefit limits - maximum $ amount or maximum # of daysin the hospital

Exclusions and limitations

Coordination of benefits - coverage under more than onepolicy

Guaranteed renewable

Cancellation and termination - explains the circumstances

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HEALTH INSURANCE TRADE-OFFS

Reimbursement versus indemnity

Internal limits versus aggregate limits

Deductibles and coinsurance

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HEALTH INSURANCE TRADE-OFFS (continued)

Out-of-pocket limit, or stop-loss

Benefits based on reasonable and customarycharges

Health information online canprovide information when you are comparing policies

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Private Sources of HealthInsurance and Health Care

Object ive 4:Evaluate private sources ofhealth insurance and health care

Private insurance companies

Individual policy

Group policy sold to an employer

Hospital and Medical service plans

Blue Cross - hospital care benefits

Blue Shield - surgical and medical servicesbenefits

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Private Sources of HealthInsurance and Health Care (continued)

Managed care

Prepaid health plan

Primary care physician

Health Maintenance Organization

Contracts with selected care providers

Fixed pre-paid monthly premium

Focus is on prevention and wellness

Basic and supplemental services

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Preferred Provider Organization

Several providers to choose from

Costs more than a HMO, but you have more

choices, fewer restrictions If you go to a non PPO provider, you pay

more

Home Health Care Agencies Home health agencies, home care aide

organizations and hospices

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Employer Self-funded Health Plans

Coverage made available by plans thatemployers, labor unions, fraternal societies, orcommunities administer

Self-funded plans often do not have the assetslike private insurance companies do

New Health Care Accounts

Health Savings Accounts

Health Reimbursement Accounts

Flex Spending Accounts

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Government Health CarePrograms

Medicare - federal program for those age 65 andolder, and certain disabled persons

Part AHospital Insurance

- Compulsory

- Covers hospital costs including doctor

Part BMedical insurance

- Voluntary if have proof of coverage

- Doctors visits and prescriptions

Part C - Medicare Advantage program

Part DMedicare Prescription Drug benefit

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Government Health Care Programs(continued)

Medigap - may pay what Medicare doesnt

Medicaid

Low income people of all ages

State administered with federal guidelines

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Medicare Fraud

You may get a reward of up to $1,000 if you meet

all of these conditions. You report suspected Medicare fraud

The Inspector Generals Office reviews your

suspicion.

The suspected fraud you report isnt alreadybeing investigated.

Your report leads directly to the recovery of atleast $100 of Medicare money.

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Patient Protection andAffordable Care Act of 2010

Process: set aside $635 Billion over the next 10 yearsfor reform.

Key provisions of the Act are: Offering tax credits for small businesses to make coverage more affordable

To prohibit denying coverage due to pre-existing medical conditions for children To provide access to affordable insurance for those with pre-existing medical

conditions

Prohibiting insurance companies from dropping coverage when people aresick.

Eliminating co-payments for preventive services

Requiring new health plans to allow persons up to age 26 to remain on theirparents insurance policy

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Patient Protection andAffordable Care Act of 2010

(continued) Process: set aside $635 Billion over the next 10 years

for reform.

Key provisions of the Act are: Prohibiting health insurance from placing lifetime caps on coverage

Restricting the use of annual limits

Ensuring consumers have appeal options with the plan

Providing funds to states to set up consumer assistance offices

Increasing money for community health centers

Increasing investment for increases the number of health care workers

Requiring health insurance companies to justify all premium increases

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Government Consumer HealthInformation Web Sites

www.hhs.gov(Health Finder)

www.nlm.nih.gov(Medline Plus)

www.nih.gov(NIH Health Information)

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http://www.hhs.gov/http://www.nlm.nih.gov/http://www.nih.gov/http://www.nih.gov/http://www.nlm.nih.gov/http://www.hhs.gov/


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Disability Income Insurance

Object ive 6:Recognize the need for disability

income insurance

Disability is more likely than death at any age

Young, healthy people dont think about risksrelated to all their future earning potential

Provides regular cash income lost as the resultof an accident, illness or pregnancy

If you become disabled your income drops butyour expenses go up

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Disability Income Insurance(continued)

Carefully read a policys definition of disability May only pay if you cant work at anyjob

Look for a policy that pays if you are unable towork at your regularjob

Aim for a benefit that when added to your otherincome will equal 60-70% of your gross pay

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How long do benefits last? To age 65? For life?

How long is the waiting period? 30 days? 90days?

Look for a policy that is both noncancelable andguaranteed renewable.

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SOURCES OF DISABILITY INCOME

Employer Group disability policy may be short or long term

Social Security Covers total disability that lasts more than twelve

months

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SOURCES OF DISABILITY INCOME (continued)

Workmans Compensation If you are injured at work or your injury is a result of

your type of employment

Disability insurance Benefits limited to 70-80% of your take home pay

Documents

Health, Disability and Long Term Care Insurance