HUSC 3366 Chapter 9 Health and Disability Insurance


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HUSC 3366 Chapter 9 Health and Disability Insurance

  1. 1. Health and Disability Insurance Chapter 9
  2. 2. Objectives <ul><li>In this chapter, you will learn to: </li></ul><ul><li>Recognize the importance of health insurance in financial planning. </li></ul><ul><li>Analyze the costs and benefits of various types of health insurance coverage as well as major provisions in health insurance policy. </li></ul><ul><li>Assess the trade-offs of different health insurance plans. </li></ul>
  3. 3. Objectives Cont’d <ul><li>Evaluate the differences among health care plans offered by private companies and the government. </li></ul><ul><li>Explain the importance of disability income insurance in financial planning and identify its sources. </li></ul><ul><li>Explain why the costs of health insurance and health care have been increasing </li></ul>
  4. 4. Health Insurance and Financial Planning Lesson: 1
  5. 5. What is Health Insurance? <ul><li>45 million Americans have no health insurance. </li></ul><ul><li>An older student population is not covered by their family’s policy. 40% are older than age 25. </li></ul><ul><li>Health insurance limits the financial burdens people suffer due to illness or injury. </li></ul><ul><ul><li>You pay a premium or fee, to the insurer. In return depending on the policy the company may reimburse you for </li></ul></ul><ul><ul><li>Hospital stays </li></ul></ul><ul><ul><li>Doctors visits </li></ul></ul><ul><ul><li>Medications and </li></ul></ul><ul><ul><li>Sometimes vision and dental care </li></ul></ul>11-7
  6. 6. What is Health Insurance? <ul><li>It’s part of your overall risk management plan to safeguard your family’s economic security. </li></ul><ul><ul><li>Medical expense insurance typically pays only the actual medical costs </li></ul></ul><ul><ul><li>Disability income insurance protects your most valuable asset - your ability to earn an income. </li></ul></ul>
  7. 7. Health Insurance and Financial Planning <ul><li>Group Health Insurance comprise more than 90% of all health insurance. </li></ul><ul><li>Most group plans are employer sponsored; employer pays part or most of the cost. </li></ul><ul><li>1996 Health Insurance Portability and Accountability Act provides federal portability standards, nondiscrimination in health insurance, and guaranteed renewability. </li></ul><ul><ul><li>If you changes jobs you need not lose your health insurance. </li></ul></ul>(continued) 11-8
  8. 8. Health Insurance and Financial Planning <ul><li>You can supplement your group policy. </li></ul><ul><ul><li>The coordination of benefits provision in a policy says that benefits received from all sources are limited to 100% of allowable medical expenses. </li></ul></ul><ul><li>Individual health insurance is also available buying it directly from the company of your choice for you or your family. </li></ul><ul><ul><li>Self-employed </li></ul></ul><ul><ul><li>Simply dissatisfied </li></ul></ul>(continued) 11-9
  9. 9. Health Insurance and Financial Planning <ul><li>COBRA – (Consolidated Omnibus Budget Reconciliation Act of 1986) </li></ul><ul><li>Requires many employers to offer employees and dependents the option to continue their group coverage for a set period of time following a divorce or job lay-off. </li></ul><ul><li>The individual must pay the premiums themselves. </li></ul>
  10. 10. Health Insurance Coverage Lesson: 2
  11. 11. A Good Health Insurance Plan Should.. <ul><li>Offer basic coverage for hospital and doctor bills. </li></ul><ul><li>Cover at least 120 days hospital room and board. </li></ul><ul><li>Provide at least $1,000,000 lifetime maximum for each family member. </li></ul><ul><li>Pay at least 80% of out-of-hospital expenses after yearly deductible of $500-$1,000/person is met . </li></ul><ul><li>Impose no unreasonable exclusions. </li></ul><ul><li>Limit your out-of-pocket expenses to no more than $3,000 to $5,000 in a year, excluding dental, optical, and prescription costs. </li></ul>11-10
  12. 12. Types of Health Care Coverages <ul><li>Basic includes… </li></ul><ul><ul><li>Hospital expense insurance. </li></ul></ul><ul><ul><ul><li>Hospital room and board and other charges. </li></ul></ul></ul><ul><ul><li>Surgical expense insurance. </li></ul></ul><ul><ul><ul><li>Surgeon's fee for an operation. </li></ul></ul></ul><ul><ul><li>Physician expense insurance. </li></ul></ul><ul><ul><ul><li>Pays for physician’s care that does not include surgery, such as office visits, lab tests and X-rays. </li></ul></ul></ul>11-11
  13. 13. Types of Health Care Coverages <ul><li>Major medical expense insurance. </li></ul><ul><ul><li>Covers expenses for a serious injury or long-term illness. Has a deductible, coinsurance, and a stop-loss provision. </li></ul></ul><ul><li>Comprehensive major medical insurance. </li></ul><ul><ul><li>Low deductible offered without a separate, basic plan. Covers hospital, surgical, and other bills. </li></ul></ul><ul><li>Dread disease and cancer insurance policies. </li></ul><ul><ul><li>Focus on unrealistic fears, and only pays out for very specific conditions. Often sold by people working on commission. Poor value. </li></ul></ul>(continued) 11-12
  14. 14. Types of Health Care Coverages <ul><li>Hospital indemnity. </li></ul><ul><ul><li>Pays a fixed amount for each day you are in a hospital. Best for people in high-risk groups . </li></ul></ul><ul><li>Dental expense insurance. </li></ul><ul><ul><li>Covers exams, cleaning, x-rays, fillings, root canals, and oral surgery. </li></ul></ul><ul><li>Vision care. </li></ul><ul><ul><li>Exams, contact lenses, and glasses. </li></ul></ul><ul><li>Long term care insurance. </li></ul><ul><ul><li>Growing faster than any other form of insurance. </li></ul></ul>(continued) 11-13
  15. 15. Health Insurance Policy Provisions <ul><li>Eligibility. </li></ul><ul><ul><li>Varies with age, marital status, and dependency . </li></ul></ul><ul><li>Assigned benefits. </li></ul><ul><ul><li>Insurance pays your doctor or hospital directly. </li></ul></ul><ul><li>Internal limits. </li></ul><ul><ul><li>Fixed amount per day for a hospital room. </li></ul></ul><ul><li>Copayment. </li></ul><ul><ul><li>Cost sharing in the form of a flat dollar amount you pay, such as $15.00 per office visit or $10 per prescription. </li></ul></ul>11-14
  16. 16. Health Insurance Policy Provisions <ul><li>Service benefits vs. fixed $ amount </li></ul><ul><li>Benefit limits - maximum $ amount or maximum # of days in the hospital. </li></ul><ul><li>Exclusions and limitations. </li></ul><ul><li>Coordination of benefits - coverage under more than one policy. </li></ul><ul><li>Guaranteed renewable. </li></ul><ul><li>Cancellation and termination - explains the circumstances. </li></ul>(continued) 11-15
  17. 17. Health Insurance Trade-Offs Lesson: 3
  18. 18. Trade-Offs in Choosing a Policy <ul><li>Reimbursement versus indemnity. </li></ul><ul><li>Inside limits versus aggregate limits. </li></ul><ul><li>Deductibles and coinsurance. </li></ul><ul><li>Out-of-pocket limit, or stop-loss. </li></ul><ul><li>Benefits based on reasonable and customary charges. </li></ul><ul><li>Health information online can provide information when you are comparing policies. </li></ul>11-16
  19. 19. Private Health Care Plans and Government Health Care Programs Lesson: 4
  20. 20. Private Sources of Health Insurance and Health Care <ul><li>Private insurance companies. </li></ul><ul><ul><li>Individual policy. </li></ul></ul><ul><ul><li>Group policy sold to an employer. </li></ul></ul><ul><li>Hospital and medical service plans. </li></ul><ul><ul><li>Blue Cross - hospital care benefits. </li></ul></ul><ul><ul><li>Blue Shield - surgical and medical services benefits. </li></ul></ul><ul><ul><li>Managed care. </li></ul></ul><ul><ul><ul><li>Prepaid health plan. </li></ul></ul></ul><ul><ul><ul><li>Primary care physician. </li></ul></ul></ul>11-17
  21. 21. Types of Managed Care <ul><li>Health Maintenance Organization. </li></ul><ul><ul><li>Contracts with selected care providers. </li></ul></ul><ul><ul><li>Fixed pre-paid monthly premium. </li></ul></ul><ul><ul><li>Focus is on prevention and wellness. </li></ul></ul><ul><ul><li>Basic and supplemental services. </li></ul></ul><ul><li>Preferred Provider Organization. </li></ul><ul><ul><li>Several providers to choose from. </li></ul></ul><ul><ul><li>Costs more than a HMO, but you have more choices, fewer restrictions. </li></ul></ul><ul><ul><li>If you go to a non PPO provider, you pay more. </li></ul></ul>11-18
  22. 22. Government Health Care Programs <ul><li>Medicare - federal program for those age 65 and older, and certain disabled persons. </li></ul><ul><ul><li>Part A - compulsory. </li></ul></ul><ul><ul><ul><li>- Covers hospital costs including doctor </li></ul></ul></ul><ul><ul><li>Part B - voluntary if have proof of coverage. </li></ul></ul><ul><ul><li>- Doctor’s visits and prescriptions </li></ul></ul><ul><ul><li>Parts C & D – Medicare +Choice Plan </li></ul></ul><ul><li>Medigap - may pay what Medicare doesn’t. </li></ul><ul><li>Medicaid. </li></ul><ul><ul><li>Low income people of all ages. </li></ul></ul><ul><ul><li>State administered with federal guidelines. </li></ul></ul>11-19
  23. 23. Medical Websites <ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul><ul><li> </li></ul>11-20
  24. 24. Disability Income Insurance Lesson: 5
  25. 25. Long Term Care ?’s <ul><li>Maximum Daily benefit? </li></ul><ul><li>How long does coverage last? </li></ul><ul><li>Maximum policy limit? </li></ul><ul><li>Elimination period? </li></ul><ul><li>Coverage if you stay at home? </li></ul><ul><li>Insurer safety? </li></ul>11-21
  26. 26. Disability Income Insurance and Financial Planning <ul><li>Disability is more likely than death at any age. </li></ul><ul><li>Young, healthy people don’t think about risks related to all their future earning potential. </li></ul><ul><li>Provides regular cash income lost as the result of an accident, illness or pregnancy. </li></ul><ul><li>If you become disabled your income drops but your expenses go up. </li></ul>11-22
  27. 27. <ul><li>Carefully read a policy’s definition of disability. </li></ul><ul><ul><li>May only pay if you can’t work at any job. </li></ul></ul><ul><ul><li>Look for a policy that pays if you are unable to work at your regular job. </li></ul></ul><ul><li>Aim for a benefit that when added to your other income will equal 60-70% of your gross pay. </li></ul><ul><li>How long do benefits last? To age 65? For life? </li></ul><ul><li>How long is the waiting period? 30 days? 90 days? </li></ul><ul><li>Look for a policy that is both noncancelable and guaranteed renewable. </li></ul>Disability Income Insurance and Financial Planning (continued) 11-23
  28. 28. Four Sources of Disability Income <ul><li>Employer </li></ul><ul><ul><li>Group disability policy may be short or long term. </li></ul></ul><ul><li>Social Security. </li></ul><ul><ul><li>Covers total disability that lasts more than twelve months. </li></ul></ul><ul><li>Workman’s Compensation. </li></ul><ul><ul><li>If you are injured at work or your injury is a result of your type of employment. </li></ul></ul><ul><li>Disability insurance. </li></ul><ul><ul><li>Benefits limited to 70-80% of your take home pay. </li></ul></ul>11-24
  29. 29. High Medical Costs Lesson: 6
  30. 30. Health Care Costs <ul><li>The US has the highest per capita medical expenditures of any industrialized country in the world. </li></ul><ul><ul><li>$7,761 health care costs per person in 2005. </li></ul></ul><ul><ul><li>This amount is twice as much spent on health care as the average for the 24 industrialized countries in Europe and North America. </li></ul></ul><ul><ul><li>Medical expenditures were 6% of the GDP in 1965, but rose to 16% of our GDP in 2005 and are predicted to be 17% in 2011. </li></ul></ul>11-2
  31. 31. Why Does Health Care Cost So Much? <ul><li>High administrative costs. </li></ul><ul><ul><li>26% of health care dollar vs. 1% in Canada. </li></ul></ul><ul><li>Use of sophisticated, expensive technologies. </li></ul><ul><li>Duplication of tests and technologies. </li></ul><ul><li>Increases in the variety and frequency of treatments. </li></ul><ul><li>Increasing number and longevity of elderly people. </li></ul><ul><li>Regulations that result in cost shifting rather than cost reduction. </li></ul>11-3
  32. 32. Why Does Health Care Cost So Much? <ul><li>Increasing number of accidents, crimes that require emergency services. </li></ul><ul><li>Limited competition, restrictive work rules in the health care delivery system. </li></ul><ul><li>Labor intensiveness, rapid earnings growth for health care professionals. </li></ul><ul><li>Innovative treatments for AIDS, cancer. </li></ul><ul><li>Built in inflation in health care delivery system. </li></ul><ul><li>Malpractice Insurance. </li></ul><ul><li>Aging baby boomers </li></ul>11-4
  33. 33. What is Being Done About the High Costs of Health Care? <ul><li>Careful review of fees and charges. </li></ul><ul><li>Establish incentives for... </li></ul><ul><ul><li>Preventive care. </li></ul></ul><ul><ul><li>Services provided out of the hospital where medically acceptable. </li></ul></ul><ul><li>Involve community in balancing health care needs, health care resources. </li></ul><ul><li>Encourage prepaid group practices. </li></ul><ul><li>Support community health education programs so people take better care of themselves. </li></ul>11-5
  34. 34. What Can You do to Reduce Your Personal Health Care Costs? <ul><li>Stay well - focus on prevention. </li></ul><ul><ul><li>Eat a balanced diet, keep your weight under control. </li></ul></ul><ul><ul><li>Avoid smoking, don’t drink to excess. </li></ul></ul><ul><ul><li>Get enough rest, relaxation, and exercise. </li></ul></ul><ul><ul><li>Drive carefully, watch out for accident and fire hazards in the home. </li></ul></ul>11-6