HEALTH AND LIFE INSURANCE Chapter 15

15.1 HEALTH INSURANCE BASICS

WHAT HEALTH INSURANCE COVERS Advanced technology means living longer and higher expenses 2005 hospital costs approximately $1500 a day. Malpractice settlement average $1.2 million.

Basic Coverages Hospitalization-max. fixed daily amount for room, nursing care, supplies Surgery-up to a certain amount Outpatient services (physician’s expense insurance) Major medical- pays a portion of costs from serious illness or accident (pt, hospital stays, surgery)

ADDITIONAL COVERAGE CHOICES Medications (rx)-could exclude certain types of medication. May require the use of generic drugs (same chemical composition as name brand counterparts) Dental care Vision care

WHAT’S NOT COVERED Cosmetic surgeries Experimental treatment

THE AFFORDABLE CARE ACT Cannot be denied coverage (pre-existing conditions-medical condition diagnosed or treated before you joined a new insurance plan) Cannot be charged more based on health status or gender No annual or lifetime limits on benefits Required types of coverages. Children can stay on parent’s policy until age 26. Individual Mandate Penalty You Pay If You Don't Have Health Insurance Coverage | HealthCare.gov Individual Mandate Penalty You Pay If You Don't Have Health Insurance Coverage | HealthCare.gov

INSURANCE FOR SPECIAL HEALTH NEEDS Long Term Care Insurance- provided coverage for nursing home or home health care Disability Income Insurance-unable to work for a period of time. Will replace portion of income 60% Waiting period of 1-6 months

15.2 HEALTH INSURANCE PLANS

FEE FOR SERVICE PLANS Also called indemnity plans Pay for services up front. A claim is submitted by provider (doctor). Will be reimbursed a portion of cost.

Costs Will include a deductible. Amount is PER YEAR (not per occurrence) Higher deductible=lower premium Co-insurance-portion of covered medical expenses you must pay after meeting deductible. 80/20 (80% insurance, 20% insured) Can choose any provider Reimbursement based on “reasonable and customary charges”. Fee that insurance company uses. What the provider actually charges is not considered.

Limits Out of pocket maximum- insurance company will pay all of expenses after you have paid the out of pocket maximum. No more co-insurance, deductible, etc. to pay

MANAGED CARE PLANS Also called pre-paid plan. Premium is pre-payment. Less paperwork, insured don’t need to submit claims. How Managed Care Works Fees are negotiated with providers by insurance company. Need to use providers from within the plan or pay more (maybe all) of the costs.

Many plans pay care providers a fixed amount no matter what services they provide (capitation). Some believe this causes doctors to spend too little time with patients. Most require preapproval for nonemergency hospitalization. May require a second opinion (they usually pay 100%) before the procedure. Usually require a co-payment. You pay a specific amount and insurance pays the rest.

THE 3 TYPES OF MANAGED CARE PLANS 1. HMO (Health maintenance organization)-charges a set amount each year. Most services require only a co- payment. Must choose a primary care physician who coordinates your care. Must see first and get a referral. Only pay for services from providers in plan. If you go outside may need to pay entire amount. Least expensive to insured if you stay within plan

2. Preferred Provider Organization (PPO)- contracts with doctors, hospitals, etc. to offer care at a reduced cost. Can go outside plan but pay a larger part of cost. Are not required to have a primary care physician. May be able to refer yourself to a specialist. Co-payment Outside plan, meet a deductible and pay larger co- insurance. Pay difference between doctor charge and what the plan will pay.

3. Point-of –Service Plan (POS)-combination of HMO and PPO Must have primary care physician. Can go outside of plan Must be referred to outside of plan for insurance to pay larger co-insurance amount. You pay more than a PPO if you go outside of plan (encourages you to stay within plan).

15.3 CHOOSE A HEALTH PLAN

SOURCES OF HEALTH INSURANCE 1. Group health insurance-employers, unions, and professional organizations may offer insurance to members. Half of Americans will health insurance through employer (prior to ACA) Lower premiums due to negotiation for large groups and lower administration costs.

Employer-sponsored programs-can enroll when start job or during open enrollment (specified period each year). May get a choice between types of plans depending on what employer offers. Usually not offered to part time employees. If it is, will have to pay full premiums. COBRA (Consolidated Omnibus Budget Reconciliation Act)-employees may continue coverage for 18 months. Must pay full premium.

2. Individual Health Insurance-more flexibility to choose coverage but more expensive. individuals for shop for insurance. Based on income, may get a government subsidy to pay a portion of premiums Enrollment opens November 1, 2015 for coverage starting in 2016.

3. Government sponsored health insurance Medicare-government insurance for those age 65 or older or have certain disabilities. Contributions through payroll taxes, employers match. Medigap-optional coverage that pays for costs not covered by Medicare. Sold by private companies. Medicaid-government insurance for those with low income or disabilities. Supported by federal and state government but run by states.

Worker’s Compensation- program to pay for expenses for work related injuries, illnesses, and death. Employers contribute to program which is required by the state. Generally receive 2/3 of salary if can’t work. Family may receive cash benefits in case of employee’s death.

15.4 HEALTH CARE RIGHTS AND RESPONSIBILITIES Getting a referral requires two doctor visits (primary care and specialist) This costs the insurance company but primary care physician may be able to treat, saving expense of more costly specialist. Problem for insured is more time to go to two appointments (and wait for opening) and condition may get worse with time. If you need to get in right away, see another doctor in the practice, ask to fill a cancelled appointment.

In-Plan Provider More covered by insurance (higher coinsurance %) If not convenient or a doctor/hospital/clinic you want to use, may need to find a different plan Pre-approvals-insurance may not pay if you do not get a required pre-approval Second opinions-benefit for you but getting additional knowledge. Benefits insurance company if they can avoid a costly procedure. Make sure you are satisfied the treatment is the right one (third opinion?)

The appeals process Every health plan has one. Start with the company-check you plan document. Call a customer service representative. Check deductible Check that the claim was properly file (code) Ask that the claim is reviewed. Keep written records. State insurance commission or state department of health. Court action

15.5 LIFE INSURANCE

Life insurance-protects family from financial hardship in case of death. Face value-amount paid upon death Beneficiary-person or people who will receive the payment (death benefit)

TYPES OF LIFE INSURANCE Term-pays a death benefit if the policyholder dies within a specific period of time (term) Less expensive Based on risk Examples of types of term insurance: Level term Renewable term Convertible term

Permanent Life Insurance –provides a death benefit plus a savings plan. Last throughout the policyholder’s life Also called cash value like insurance. Types: Whole life Variable life Universal life

LIFE INSURANCE AS AN INVESTMENT Permanent life insurance has a higher premium due to saving component. Typically, it would provide a better return (make more money) to choose term and invest the difference.

DETERMINING AMOUNT OF LIFE INSURANCE NEEDED No “right amount” Based on: Replacing income Funeral expenses Medical bills Surviving family members Guarantee a loan Consider: Your financial responsibilities Your financial situation Your Future Your special needs

RISK FACTORS Insured’s health Family health history Occupation or hobbies Gender Age of Insured