Lesson 6-2 Protecting Income Learning Goals: Explain the need for health insurance, the type of coverage, and the ways to manage health care and health care spending Explain the need for disability insurance and the types of plans available Explain the need for life insurance and the types of coverage available

Why do you need health insurance? Health insurance is a plan for sharing the risk of medical costs from injury or illness. People need health insurance to help pay high medical expenses. Types of Plans Fee-for-Service Plans Preferred Provider Organization (PPO) Plans Health Maintenance Organization (HMO) Plans Government-Sponsored Health Care Your Role in Health Care Types of Health Coverage Basic Health Care Major Medical Costs Dental and Visions Coverage Catastrophic Illness Long-Term Care

Types of Plans Fee-for-Service Plans A fee-for-service plan allows patients to choose doctors and other providers for medical services. The insurance policy has a deductible, which is the amount of money you must pay toward your medical expenses before your insurance company begins to pay. Preferred Provider Organization (PPO) Plans A PPO is a network of independent health care providers (doctors, hospitals, clinics, and labs) that work together to provide health care services. Patients choose caregivers from approved lists. The PPO plan usually has a copayment (copay), which is an amount you must pay each time you use a medical service at a doctor’s office. For more major health care, you still have a deducatable.

Types of plans Health Maintenance Organization (HMO) Plans An HMO is a group plan that provides prepaid medical care for its members. HMO’s usually have their own facilities (clinics and hospitals) and offer a full range of services. Patients must choose a doctor on the HMO staff and must be referred by this doctor to see a specialist. There is often not a deductible but patients pay a copay for each visit. Government-Sponsored Health Care Medicare and Medicare are government-sponsored health insurance. Medicare is for people age 65 or older Medicaid is for people with low incomes and limited resources.

Your role in health care Take an active role in protecting you health by watching what you eat and exercising. Naturopathic choices is where you seek natural ways, ingredients, foods, and additives rather than chemically- produced one. Education programs can inform people about ways to stay healthy.

Type of health coverage Basic Health Care coverage includes medical, hospital, and surgery services. It pays for doctor fees, office visits, and lab work. Cosmetic and elective surgeries are usually not covered. Major Medical Costs protects against very serious injury or illness. It pays for services beyond basic health care. Dental and Vision Coverage Catastrophic Illness policies provide protection should you get cancer or some other disease or condition that might cost hundreds of thousands of dollars to treat. Long-term care insurance covers the expenses involved in extended care offered in nursing homes, assisted living facilities, or at home by visiting health care professionals.

Managing costs Deductibles and Copays Stop-Loss Provisions When deductible and copays are lower, premiums are often higher. Choosing higher deductibles and copays is one way to reduce health insurance premiums. However, you must self-insure, or set money aside, to pay for the higher deductible amount. Stop-Loss Provisions A stop-loss provision is an insurance policy clause that provides 100 percent coverage of medical expenses after a certain amount of money has bee paid by the insured. Health Spending Accounts A health flexible spending account (FSA) allows people to set aside money to pay for qualified medical expenses. The money set aside is pre-tax. Amounts not used by the end of the year are forfeited. A health savings account (HSA) may be set up through an employer or individual. They money set aside is pre-tax. Money not used is carried forward to the next year. The major advantage of this type of plan is that people manage their own health care dollars.

Disability insurance Disability insurance provides income to replace a portion of normal earnings when the insured is unable to work due to a nonwork-related injury or illness. Short-term Disability Insurance Short-term disability insurance covers you if you are temporarily unable to work due to an injury or illness. The disabled person receives a portion of regular pay for a short period of time – usually three to six months or up to two years. Long-term Disability Insurance Long-term disability insurance covers you when you are unable to return to work for a long period of time. It is often used to fill the gap between employment and retirement. It pay a percentage of regular pay and continues for two to five years or until retirement. The smaller the payment percentage the lower the premium. Social Security Disability The Social Security Act provides for disability coverage for those who cannot work.

Life Insurance Life insurance pays money to the beneficiary upon the death of the insured person. A beneficiary is the person designated to receive the proceeds of the policy. Reasons to have life insurance: To pay off a home mortgage and other debts at the time of death, such as funeral costs To provide money for a spouse and children to maintain their lifestyle To pay for education for children To make charitable bequest at death To accumulate savings To pay inheritance and estate taxes To provide cash value that can be borrowed later Two common types of life insurance: Temporary insurance Permanent insurance

Temporary life insurance Temporary insurance provides a death benefit only. Term life insurance is a policy that provides only a death benefit and is in effect for a specific period of time, such as 20 years. Pay premiums through the time period to keep the insurance in effect. Renewable term insurance gives the insured the right to renew the policy for another time period. Decreasing term insurance, the amount of coverage goes down each year, while the premium remains the same. Level term insurance the death benefit does not change, but the cost of the premiums can go up each year.

Permanent life insurance Provides a death benefit and builds cash value. Whole Life Pay premiums for as long as the policy is in effect. The policy pays the face value to the beneficiary at the death of the insured. As the cash value builds, it can be borrowed against by the insured. Limited-Pay Life Pay premiums for a limited time. At the end of the period, the policy is paid up. The insured pays no more in premiums, but the life insurance remains in effect until the age limit of the policy. Universal Life A flexible policy that allows the policyholder to change the death benefit and the premiums throughout the life of the policy. Variable Life Form of permanent insurance that provides a death benefit with investment options. Premiums are fixed. The portion of the premium designated to the cash value can be invested in options chosen by the policyholder.

Group Life insurance A life insurance policy is purchased through an employer or an organization Group life insurance represents a lower risk to the insurance company Large groups can usually negotiate better coverage and lower premiums. Some are portable – can be taken with you when you leave your job.

Assignment Assignment for 6-2: Page 203 – problems 1-13, 16-19