1. Health, Disability, and Life Insurance
Chapter 14

2. Health Insurance and Financial Planning
Section 14.1

3. What is Health Insurance
Protection from illness or injury
Includes both medical expense insurance and disability income insurance
Medical expense insurance pays actual medical costs
Disability income insurance covers income person lost from illness and injury

4. Group Health Insurance
Most people who have insurance are covered under this type of plan
Usually employer sponsored, or by labor unions or professional associations
They cover most or all of cost
Cost is fairly low because so many people are insured under the same policy
Coordination of Benefits
Allows you to combine benefits from more than one insurance plan
Benefits are limited to 100%

5. Individual Health Insurance
Buy from the company of your choice
Individual or family plans available
COBRA
Allows those who lose job to keep former employer’s group coverage for a set time
Have to work for a private company or state or local govt. to be eligible

6. Basic Health Insurance Coverage
Hospital Expense
Some or all of daily cost of room and board
Routine nursing, minor medical supplies, use of other hospital facilities as well
Surgical Expense
Pays all or part of surgeon’s fees
Physician Expense
Meets some or all of the costs that do not involve surgery
Routine visits, x-rays, lab tests

7. Major Medical Expense Insurance
Covers long hospital stays and multiple surgeries
Coinsurance
Set % of medical expenses you must pay in addition to deductible amount
20 to 25% of expenses
Stop-Loss Provisions
Policyholder must pay all costs up to a certain amount then insurance will pay rest
$3,000 to $5,000
Comprehensive Major Medical
Pays hospital, surgical, medical, and other bills
Limits on what they will pay on expenses

8. Dread Disease Policies
Policies sold through the mail, newspapers, magazines
For dread disease, trip accident, death insurance, cancer
Play upon people’s fear and are illegal in many states
Usually only cover very specific conditions which are normally already covered under major medical plans

9. Dental Expense Insurance
Encourages preventative dental care and pays for maintenance care
Oral examinations, x-rays, cleanings, fillings, extractions, oral surgery, dentures, and braces
May have a deductible and coinsurance

10. Vision Care Insurance May be part of group plan
Covers eye examinations, glasses, contact lenses, eye surgery, treatment of eye diseases

11. Long-Term Care Insurance
Provides expense for daily help you may need if you become seriously ill or disabled and cannot care for yourself
Nursing homes
Dressing, bathing, household chores
Premiums are $900 to $15,000 depending on age and amount of coverage

12. Major Provisions
Eligibility – defines those covered under a policy (usually spouse and children to a certain age)
Internal Limits – specific levels of repayment for certain services (hospital room could cost $400 a day but internal limit only pays $250)
Co-Payment – flat fee you pay every time you receive a covered service
Preexisting Conditions – conditions diagnosed before the insurance plan took effect; often not covered along with cosmetic surgery

13. Health Insurance Plans Should….
Offer basic coverage for hospital and doctor bills
Provide at least 120 days hospital room and board in full
Provide at least $1 million lifetime maximum for each family member
Pay at least 80% for out-of-hospital expenses after a yearly deductible of $500 per person or $1000 per family
Impose no unreasonable exclusions
Limit your out-of-pocket expenses to no more than $3000 to $5000 a year, excluding dental, vision care, and prescription costs

14. Private and Govt. Plans
Section 14.2

15. Private Health Care Plans
Private Insurance Companies
Hospital and Medical Service Plans
Managed Care
Health Maintenance Organizations (HMO)
Preferred Provider Organizations (PPO)
Point of Service Plan (POS)

16. Private Insurance Companies
Provide group health plans to employers
Premiums may be fully or partially paid for by employers
Employees pay remainder of cost

17. Hospital and Medical Service Plans
Blue Cross/Blue Shield are statewide organizations similar to private companies
Each state has a Blue Cross/Blue Shield
Blue Cross provides hospital care
Blue Shield provides surgical and medical services

18. Managed Care
Prepaid health plans that provide comprehensive health care to their members
Designed to control cost of health care services by controlling how they are used
HMO’s, PPO’s, and Point of Service Plans

19. Health Maintenance Organizations (HMOs)
Preapproved doctors to provide care in exchange for fixed, prepaid premiums
Give preventative care like immunizations, screening, diagnostic tests with the idea they will minimize future medical problems
Coverage for surgery, hospital care, and emergency care
Usually pay small co-payment for each service
Vision coverage and prescription services are extra
Any treatment from doctors not on approved list you have to pay cost yourself
Exception is if there is an emergency that would threaten your life

20. Tips on Choosing HMO Make sure doctors are near your home
You should be able to change doctors if you don’t like your first choice
Second opinions should always be available at HMO’s expense
Should be able to appeal any case in which HMO denies care

21. Preferred Provider Organizations (PPO)
Group of doctors and hospitals agree to provide specified medical service at prearranged fees
PPO plan members pay no deductibles, but may have small co-payments
PPO plan members can go to doctors not on pre-approved list, but may pay larger deductibles and co-payments

22. Government Health Care Programs
Medicare
Medicaid

23. Medicare
Federally funded to those over 65 or those with certain disabilities
Part A – hospital insurance
Social Security tax
Inpatient hospital and nursing facility care, home health, and hospice
Part B – medical insurance
Doctor’s services and other services not covered by Part A
Deductible and 20% coinsurance
Supplemental, meaning additional coverage for those who don’t feel fully covered

24. Medicare Finances In danger Health care costs growing
Population of senior citizens growing
Projections from 2004 say it will be bankrupt by 2019 if no changes made

25. What is not covered by Medicare?
Skilled or long-term nursing care
Out of hospital prescription drugs
Routine checkups
Dental care
Most immunizations
If doctor does not accept Medicare’s approved payment in full, patient must pay themselves

26. Medigap Eligible people are those who receive Medicare
Supplements the gap between Medicare payments and medical costs nto covered by Medicare

27. Medicaid Low income individuals and families
Financed by state and federal funds
Benefits include:
Physician services
Inpatient hospital services
Outpatient hospital services
Lab services
Skilled nursing and home health services
Prescription drugs
Eyeglasses
Preventative care for people under 21

28. The US market-based health care system relies heavily on private and not-for-profit health insurance, which is the primary source of coverage for most Americans. According to the United States Census Bureau, approximately 84% of Americans have health insurance; some 60% obtain it through an employer, while about 9% purchase it directly. Various government agencies provide coverage to about 27% of Americans (there is some overlap in these figures).
Public programs provide the primary source of coverage for most seniors and for low-income children and families who meet certain eligibility requirements. The primary public programs are Medicare, a federal social insurance program for seniors and certain disabled individuals, Medicaid, funded jointly by the federal government and states but administered at the state level, which covers certain very low income children and their families, and SCHIP, also a federal-state partnership that serves certain children and families who do not qualify for Medicaid but who cannot afford private coverage. Other public programs include military health benefits provided through TRICARE and the Veterans Health Administration and benefits provided through the Indian Health Service. Some states have additional programs for low-income individuals.
In 2006, there were 47 million people in the United States (16% of the population) who were without health insurance for at least part of that year. About 37% of the uninsured live in households with an income over $50,000.

29. Lifestyle Choices: 7 in 10 Americans do not exercise regularly
4 in 10 Americans are not physically active
60 percent of all Americans are overweight

30. Prescription Drug Costs:
• 23 prescription drugs account for 50 percent of prescription sales
• $1 billion in sales attributed to 30 drugs
• 17 percent increase in cost from 2000 to 2001 or $22.6 billion

31. Cost Shifting: Medical Technology:
43 Million Americans do not have health insurance or are underinsured
Medical Technology:
Up to 1/3 of the projected increase in health care in the US during the next five years will be the result of new technology

32. Disability Insurance
Section 14.3

33. Disability Insurance
Cash income when unable to work due to pregnancy, non-work related accident, or an illness
Very common
Word disability can vary from insurer to insurer

34. Sources of Disability Income
Worker’s Compensation
Employer
Social Security
Private Income Insurance Programs

35. Worker’s Compensation
Result of accident or illness that occurred on the job
Benefits depend on salary and work history

36. Employer Provided through group insurance plans
Employer pays part or all of cost
Could be continued wages for several months or for long-term

37. Social Security Eligible if you paid into Social Security system
Depends on salary and number of years you’ve been working
Dependents may qualify for some benefits
Strict rules
Physical or mental condition that prevents work for at least 12 months
Or, have a condition that may result in death
Starts paying 6 months after person is disabled

38. Private Income Insurance Programs
Weekly or monthly cash payments to those who cannot work from accident or illness
Pays 40 to 60% of normal income, although some may pay up to 75%

39. Disability Insurance Trade-Offs
Waiting or Elimination Period – one to six months, longer the wait the less the cost
Duration of Benefits – look for those that last throughout life
Amount of Benefits – look for benefit that will equal 70 to 80% when added to other sources of income
Accident and Sickness Coverage – look for those that also pay for sickness in addition to accidents
Guaranteed Renewability – make sure that they will not cancel coverage when you fall ill

40. Life Insurance
Section 14.4

41. What is Life Insurance?
Contract in which you pay a certain premium periodically
Stated money amount paid upon your death
Paid to your beneficiary – person named to receive your benefits

42. Purpose of Life Insurance
Pay off mortgage or other debt
Money for children when they reach certain age
Education or income for children, survivors
Charitable donations
Retirement income
Accumulate savings
Set up an estate plan
Pay estate and death taxes

43. Principle of Life Insurance
Estimate how long people will live
Set the price of life insurance on tables
Higher premiums for those who will die sooner

44. Types of Life Insurance Policies
Term Insurance
Pays out only if you die during the term it covers
May only get covered for the time you have children
Renewable Term - allows to renew after original term is up
Multiyear Level Term – Guarantees you pay the same premium for the duration of policy
Conversion Term – Allows you to change from term to permanent, with a higher premium
Decreasing Term – Pays less to beneficiary as time passes

45. Whole Life Insurance Pay a set amount for the rest of your life
Also serves as an investment