Chapter 9 Health and Disability Income Insurance McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

Health and Disability Income Insurance Chapter Objectives Recognize the importance of health insurance in financial planning. Analyze the costs and benefits of various types of health insurance coverage as well as major provisions in health insurance policies. Assess the trade-offs of different health insurance plans. Evaluate the differences among health care plans offered by private companies and by the government. Explain the importance of disability income insurance in financial planning and identify its sources. Explain why the costs of health insurance and health care have been increasing. 9-2

Objective 1 Recognize the Importance of Health Insurance in Financial Planning Eases the financial burden people may experience as a result of illness or injury Includes: Medical expense insurance Disability income insurance 9-3

Health Insurance Group Plans: The Health Insurance Portability and Accountability Act of 1996: 9-4

Health Insurance Group Policy Supplements Individual Health Insurance COBRA 9-5

Types of Health Insurance Coverage Objective 2 Analyze the Costs and Benefits of Various Types of Health Insurance Coverage as well as Major Provisions in Health Insurance Policies Types of Health Insurance Coverage Basic Major medical Both 9-6

Types of Health Insurance Coverage Basic Health Insurance 9-7

Types of Health Insurance Coverage Major medical expense insurance Comprehensive major medical insurance 9-8

Types of Health Insurance Coverage Hospital indemnity Dental expense insurance 9-9

Types of Health Insurance Coverage Vision care Dread disease policies Long term care insurance 9-10

Major Provisions in a Health Insurance Policy Eligibility Assigned benefits Internal limits 9-11

Major Provisions in a Health Insurance Policy Copayment Service benefits Benefit limits 9-12

Major Provisions in a Health Insurance Policy Exclusions and limitations Guaranteed renewable Cancellation and termination 9-13

Objective 3 Assess the Trade-offs of Different Health Insurance Plans Trade-Offs in Choosing a Policy Reimbursement versus indemnity Reimbursement pays actual costs Indemnity pays specific amounts Internal limits versus aggregate limits Deductibles and coinsurance Out-of-pocket limit Benefits based on reasonable and customary charges 9-14

Health Insurance Must-Haves 9-15

Objective 4 Evaluate the Differences Among Health Care Plans Offered by Private Companies and by the Government Private Health Care Plans Private Insurance Companies Individual policy Group policy sold to an employer Hospital and Medical Service Plans Blue Cross = hospital care Blue Shield = surgical and medical services 9-16

Private Health Care Plans Health Maintenance Organization (HMO) 9-17

Private Health Care Plans Preferred Provider Organization (PPO) Point-of-Service (POS) 9-18

Private Health Care Plans Home Health Care Agencies Employer Self-Funded Health Plans 9-19

New Health Care Accounts Health Spending Accounts (HSA) Health Reimbursement Accounts (HRA) Flexible Spending Accounts (FSA) 9-20

Government Health Care Programs Medicare 9-21

MEDICARE Part A: Hospital insurance Part B: Medical insurance 9-22

MEDICARE Part C: Part D: Medicare Advantage plans available in many areas Part D: Prescription drug coverage 9-23

MEDICARE Medicare Choice Medigap (MedSup) 9-24

Government Consumer Health Information Websites Healthfinder www.hhs.gov Medline Plus www.nlm.nih.gov/medlineplus NIH Health Information Page www.nih.gov FDA www.fda.gov Medicare www.medicare.gov 9-25

Disability Income Insurance Objective 5 Explain the Importance of Disability Income Insurance in Financial Planning and Identify its Sources Disability Income Insurance Originally designed to protect against loss of income Young, healthy people don’t consider the risks related to their future earning potential Provides regular cash income lost by employees as the result of an accident or illness 9-26

Sources of Disability Income Workman’s Compensation Employer Plans Social Security Private Income Insurance Programs 9-27

Disability Income Insurance Trade-Offs 9-28

Objective 6 Explain Why the Costs of Health Insurance and Health Care have been Increasing 2009 Health care costs ≈ $2.56 trillion U.S. has highest per capita health care cost of any country in the world. Rapid increase in medical expenditures 16.9% of GDP in 2009 High administrative costs Admin = 26% of health care costs 9-29

Reasons for High Health Care Costs 9-30

What is Being Done About the High Costs of Health Care? 9-31

What Can You Do to Reduce Personal Health Care Costs ? 9-32