health and disability INCOME insurance Chapter 11 Personal Finance FIN 235

HEALTH INSURANCE AND FINANCIAL PLANNING A form of protection whose primary purpose is to alleviate the financial burdens suffered by individuals because of illness or injury. Types of Plans Group Health Insurance: employer sponsored who pay some or all of the premiums Individual Health Insurance: Individual health insurance covers either one person or a family. Coverage and cost vary from company to company

HEALTH INSURANCE AND FINANCIAL PLANNING COBRA The Consolidated Omnibus Budget Reconciliation Act of 1986 allows workers to keep their former employer’s group coverage for a set period of time. Not everyone qualifies for COBRA.

HEALTH INSURANCE COVERAGE Types of Health Insurance Coverage Basic: includes hospital expense insurance coverage, surgical expense coverage, and physician expense insurance. Hospital Expense: pays part or all of hospital bills for room, board, and other charges. Surgical Expense: pays part or all of the surgeon’s fees for an operation. Physician Expense: helps pay for physician’s care that does not involve surgery

HEALTH INSURANCE COVERAGE Major Medical Expense Insurance Coverage Protects against the large expenses of a serious injury or a long illness. Hospital Indemnity Policies Pays benefits only when you are hospitalized, but these benefits are paid to you in cash. Long-Term Care Insurance Help that you could need if you ever have an illness or disability that lasts a long time and leaves you unable to care for yourself.

Non-Medical Insurance Dental Expense Insurance  Dental expense insurance provides reimbursement for the expenses of dental services and supplies.  Vision Care Insurance  A recent development in health care coverage has been vision care insurance

Health Insurance Policy Major Provisions Eligibility Assigned benefits (pay direct to doctor/hospital) Internal limits (max allowable payment) Copayments (flat fee paid on every visit) Service benefits Benefit limits (dollars or days) Exclusions and limitations Guaranteed renewable Cancellation and termination

HEALTH INSURANCE TRADE-OFFS The benefits of health insurance policies differ, so consider the following: Reimbursement (actual $) versus indemnity (specific $) Internal limits (fixed $) versus aggregate limits (total $) Deductibles (max you pay) and coinsurance Out-of-pocket limit (max you pay before they pay 100%) Benefits based on reasonable and customary charges Two Choices Basic plus Supplementary (See Exhibit 9 – 1) Major Medical

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Health Plan Providers Hospital and Medical Service Plans Blue Cross & Blue Shield BC = hospital care BS = surgical and physicians services Health Maintenance Organizations (HMO) Health insurance plan that directly employs or contracts with selected physicians, surgeons, dentists, and optometrists to provide you with health care services in exchange for a fixed, prepaid monthly premium.

Health Plan Providers Preferred Provider Organizations (PPO) PPOs provide the services of doctors and hospitals at discount rates or give breaks in co-payments and deductibles. Employer Self-Funded Health Plans provide the amount of protection that a specific group of people desires and can afford.

Health Plan Providers Health Care Accounts Flexible Savings Accounts (FSA) allow employees to contribute pretax dollars to an account managed by an employer. Health Reimbursement Accounts (HRA) are funded solely by your employer. Health Saving Accounts (HSA) allow you to contribute money to a tax-free account that can be used for out-of-pocket health care expenses.

Health Plan Providers Medicare Medigap Medicare is a federal health insurance program for people 65 or older, people of any age with permanent kidney failure, and certain disabled people. Part A: Hospital benefits (inpatient) Part B: Physician services and medical supplies Part C: combines A & B Part D: Prescription drug coverage Medigap Privately sold Supplement for Medicare plans

Health Plan Providers Medicaid Title XIX of the Social Security Act provides for a program of medical assistance to certain low-income individuals and families. Medicaid is administered by each state within certain broad federal requirements and guidelines. Many members of the Medicaid population are also covered by Medicare.

US Govt. Sources of Information Healthfinder includes links to more than 1,000 Web sites and lists topics according to subject (www.hhs.gov). Medlineplus is world’s largest collection of published medical information (www.nlm.nih.gov/medlineplus). NIH Health Information Page directs people to the consumer health information in NIH publications and on the Internet (www.nih.gov). FDA provides information about the safety of various foods, drugs, cosmetics, and medical devices (www.fda.gov).

DISABILITY INCOME INSURANCE Benefits provide regular cash income lost by employees as the result of an accident, illness, or pregnancy. Generally disability income policies are divided into short-term and long-term policies. There are different definitions of disability. Some policies define it as simply being unable to do your regular work, while others are stricter.

DISABILITY INCOME INSURANCE Sources of Disability Income Private Income Insurance Programs Employer Plans Social Security Workers’ compensation Disability Insurance Trade Offs Waiting or elimination period Duration of benefits Amount of benefits Accident and sickness coverage Guaranteed renewability

Current Issues in Health Care Why does medical care cost so much? We want the best medical care available. R&D for new cures is expensive. New medical technology is expensive Trial lawyers and frivolous lawsuits add to costs Duplication of tests, excessive or unnecessary testing Abuse of services Fraudulent claims

Current Issues in Health Care What is being done to reduce costs? Affordable Health Care Act (2009) Government control of health services Recent GAO and CBO studies suggest costs will be significantly greater than originally thought. Corporate Health Initiatives Fitness centers Financial incentives: weight, general health Self-care assistance and education

HOMEWORK Question: (Self-audit of coverage) Do you know what type of coverage you have? Are you on your parents’ policy? Are you covered by a school policy? Do you carry your own policy” If so, what does your insurance cover in terms of; Injuries resulting from an fall Illness requiring hospitalization Be Your Own Personal Financial Planner 1 – How do you pay for health care? (no w/s)