insuring your health

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Insuring Your Health#9

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Learning Goals

Discuss why having adequate health insurance is important, and identify factors contributing to the growing cost of health insurance

Differentiate among the major types of health insurance plans, and identify major private and public health insurance providers

Analyze your own health insurance needs and explain how to shop for appropriate coverage

Explain the basic types of medical expenses covered by the policy provisions of health insurance plans

Assess the need for and features of long-term care insurance

Discuss the features of disability income insurance and how to determine your need for it

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Importance of Health Insurance

Protect against economic loss in the event of serious accidents or illnesses

Protect against rising cost of health care

In 2010, 50% of US personal bankruptcies were attributable to medical costs

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Exhibit 9.1

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Health Insurance Plans

Private Health Insurance PlansAvailable to individuals or families

Provided as group health insurance plans through various employers

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Traditional Indemnity Plans

Called “fee-for-service” plans

Typically offer unlimited choice of doctors and hospitals

Pay deductible plus a percentage of eligible costs

Reimbursements based on “usual, customary and reasonable” (UCR) charges

Health care services separate from insurer

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Managed Care Plans

Monthly payments made directly to health care providers

Designated doctors and hospitals provide services

Hold down costs by controlling amount of care provided and emphasizing prevention

Charge monthly fees plus copayments

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Types of Managed Care Plans

Health Maintenance Organizations (HMOs)

Group HMOs provide services for members from a central facility

Individual Practice Associations (IPAs) contract with physicians who operate out of their own offices and community hospitals

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Types of Managed Care Plans

Health Maintenance Organizations (HMOs)

Preferred Provider Organizations (PPOs) - Provide broader network of “approved” physicians and allow use of out-of-network providers at higher copay

Exclusive Provider Organizations (EPOs) - Members use affiliated providers or bear entire cost out of pocket

Point-of-Service Plans - Reimburse members similar to indemnity plan when providers are outside of network

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Blue Cross/Blue Shield Plans

Prepaid hospital and medical expense plans rather than insurance

Now organized as for-profit independent corporations

Blue Cross acts as intermediary between groups that want healthcare and physicians who contract to provide their services

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Exhibit 9.2 Most Common Types of Health Plans

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Government Health Insurance PlansHealth Care Reform

Goal of recently-passed legislation is to provide more people with access to needed services at affordable rates

Some government health care plans have been in place for some time

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Government Health Insurance PlansMedicare program

Administered by Social Security

Available to qualified people 65 and older and to those receiving SS disability benefits

Funded by payroll taxes paid by employers, employees and the self-employed

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Components of Medicare

Part A—Basic hospital insurance

• Free for those qualified

• Covers hospital room and board, other inpatient and outpatient care

• Deductibles apply, amounts vary according to length of stay

Part B—Supplementary medical insurance

• Optional coverage available for a premium if eligible for Part A

• Covers doctors, surgeons, lab tests, x-rays, and other services, including some home health care

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Medicaid

State-run public assistance program for those unable to pay for health care

Federal government provides some funding

Over 63 million people covered by Medicaid

Eligibility and levels of coverage vary by state

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• Premiums paid by employers for workers injured on the job

• State administered; coverage varies

Workers’ Compensation Insurance

Coverage includes:• Medical,

rehabilitation expenses

• Disability income• Lump-sum payments

for death, dismemberment

• Second-injury funds

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Health Insurance Decisions

Evaluate healthcare cost risk, consider:

Medical care and rehabilitation expenses

Loss of income from disability

Determine available coverage and resources

Choose a health insurance plan

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Medical Expense Coverage and Policy Provisions

HospitalizationPays a portion of per-day room and board charges

Use of hospital facilities

Selected other services

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Medical Expense Coverage and Policy Provisions

Surgical expenses• Pays cost of surgery in or

out of hospital• Not all procedures are

covered such as cosmetic or experimental surgery

Physician expenses• Pays physician fees for

nonsurgical hospital care • Includes consultation with

specialists and lab tests

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Medical Expense Coverage and Policy Provisions

Major medical insurance • Broad coverage for

illnesses and catastrophic injuries

• May have lifetime limits

Comprehensive major medical

• Combines major medical with basic hospital, surgical and physicians expense coverage

• Through group plans with low deductible

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Dental services:

Medical Expense Coverage and Policy Provisions

Covers necessary dental care and some dental injuries.

Mostly offered through group insurance plans.

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Other Types of Health Plans

Accident policies - Cover certain accidents

Sickness policies (dread disease policies) - Coverage limited to specific disease or illness

Hospital income policies - Guarantee a per-diem for hospital stays

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Policy Provisions of Medical Expense Plans

Deductible • Initial amount not

covered• Determined on a

calendar-year or per-incident basis

Participation (Coinsurance):

• Company pays a portion of medical expenses after a deductible

• Plan may include a stop-loss provision to cap out-of-pocket expenses

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Policy Provisions of Medical Expense Plans

Internal limits• Limits amount paid on

certain items to usual, customary, and reasonable charges even if cost is within the norms

Coordination of benefits• Eliminates double

payment when coverage provided under more than one policy

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Terms of Coverage

Persons and places covered

Cancellation

Preexisting conditions

Pregnancy and abortion

Mental illness

Rehabilitation coverage

Continuation of group coverage (COBRA)

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Cost Containment Provisions for Medical Expense Plans

Preadmission certification

Continued stay review

Second surgical opinions

Waiver of co-insurance

Limitation of insurer’s responsibility

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Long-Term Care Insurance

Involves the delivery of medical and personal care, other than

hospitalization, to persons with chronic medical conditions in nursing home, assisted living

community, or patient’s home

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Do You Need Long-Term Care Insurance?

Do you have assets to preserve for dependents?

Can you afford the premiums?

Is there a family history of disabling disease?

What is your gender?

Do you have family who can care for you?

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Long-Term Care Provisions and Costs

Type of careEligibility requirements

Services covered Waiting period Daily benefits Renewability Benefit duration

Preexisting conditionsInflation protection

Premium levels

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Typical Provisions in Long-Term Care Insurance Policies

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How to Buy Long-Term Care Insurance

Buy the policy while you are healthy

Buy the right types of coverage, but not more than needed

Understand what the policy covers and when it pays benefits

© 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Disability Income Insurance

Provides families with weekly or monthly payments to replace income lost when insured is unable to work due to an illness, injury or disease

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Estimating Disability Income Insurance Needs

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Disability Insurance Provisions and Costs

• Definition of disability - “own occupation"• Benefit amount and duration• Probationary period• Waiting period• Renewability • Other features - (COLA), guaranteed

insurability option, and waiver of premium