1. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Insuring Your Health #9

2. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Goals Discuss why having adequate health insurance is important and identify the factors contributing to the growing cost of health insurance. Differentiate among the major types of health insurance plans and identify major private and public health insurance providers and their programs. Analyze your own health insurance needs and explain how to shop for appropriate coverage. Explain the basic types of medical expenses covered by and the policy provisions of health insurance plans. Assess the need for and features of long-term care insurance. Discuss the features of disability income insurance and how to determine your need for it.

3. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Importance of Health Insurance Protect against economic loss in the event of serious accidents or illnesses Protect against rising cost of health care In 2012, 62% of US personal bankruptcies were attributable to medical costs,

4. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 9.1

5. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Health Insurance Plans Private Health Insurance Plans Available to individuals or families Provided as group health insurance plans through various employers

6. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Traditional Indemnity Plans Called “fee-for-service” plans Typically offer unlimited choice of doctors and hospitals Pay deductible plus a percentage of eligible costs Reimbursements based on “usual, customary and reasonable” (UCR) charges Health care services separate from insurer

7. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Managed Care Plans Monthly payments made directly to health care providers Designated doctors and hospitals provide services Hold down costs by controlling amount of care provided and emphasizing prevention Charge monthly fees plus copayments

8. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Managed Care Plans Health Maintenance Organizations (HMOs) Group HMOs provide services for members from a central facility Individual Practice Associations (IPAs) contract with physicians who operate out of their own offices and community hospitals

9. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Types of Managed Care Plans Health Maintenance Organizations (HMOs) Preferred Provider Organizations (PPOs) - Provide broader network of “approved” physicians and allow use of out-of- network providers at higher copay Exclusive Provider Organizations (EPOs) - Members use affiliated providers or bear entire cost out of pocket Point-of-Service Plans (POS) - Reimburse members similar to indemnity plan when providers are outside of network

10. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Blue Cross/Blue Shield Plans Prepaid hospital and medical expense plans rather than insurance Now organized as for-profit independent corporations Blue Cross acts as intermediary between groups that want healthcare and physicians who contract to provide their services

11. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Exhibit 9.2 Most Common Types of Health Plans

12. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Government Health Insurance Plans Medicare program Administered by Social Security Available to qualified people 65 and older and to those receiving SS disability benefits Funded by payroll taxes paid by employers, employees and the self-employed

13. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Components of Medicare Part A—Basic hospital insurance Free for those qualified Covers hospital room and board, other inpatient and outpatient care Deductibles apply, amounts vary according to length of stay Part B—Supplementary medical insurance Optional coverage available for a premium if eligible for Part A Covers doctors, surgeons, lab tests, x- rays, and other services, including some home health care

14. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Medicaid State-run public assistance program for those unable to pay for health care Federal government provides some funding Over 58 million people covered by Medicaid Eligibility and levels of coverage vary by state

15. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Premiums paid by employers for workers injured on the job State administered; coverage varies Workers’ Compensation Insurance Coverage includes: Medical, rehabilitation expenses Disability income Lump-sum payments for death and dismemberment

16. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Rationale for Health Care Reform The goal is to provide more people to access to needed services at affordable rates. Health care costs have risen due to (1) private insurance programs increased costs and (2) over 50% of the U.S. population relies on the government for healthcare, increasing taxpayer burdens.

17. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Key Elements of the Affordable Health Care Act of 2010 Individual Mandate Coverage of Young AdultsPre-Existing Health ConditionsHealth Care Insurance ExchangesSmall Firm Coverage of Employees

18. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Health Insurance Decisions Evaluate healthcare cost risk, consider: Medical care and rehabilitation expenses Loss of income from disability Determine available coverage and resources Choose a health insurance plan

19. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Medical Expense Coverage and Policy Provisions Hospitalization Pays a portion of per-day room and board charges Use of hospital facilitiesSelected other services

20. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Medical Expense Coverage and Policy Provisions Surgical expenses Pays cost of surgery in or out of hospital Not all procedures are covered such as cosmetic or experimental surgery Physician expenses Pays physician fees for nonsurgical hospital care Includes consultation with specialists and lab tests

21. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Medical Expense Coverage and Policy Provisions Major medical insurance Broad coverage for illnesses and catastrophic injuries May have lifetime limits Comprehensive major medical insurance Combines major medical with basic hospital, surgical and physicians expense coverage Through group plans with low deductible

22. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Dental services: Medical Expense Coverage and Policy Provisions Covers necessary dental care and some dental injuries. Mostly offered through group insurance plans.

23. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Other Types of Health Plans Accident policies - Cover certain accidents Sickness policies (dread disease policies) - Coverage limited to specific disease or illness Hospital income policies - Guarantee a per- diem for hospital stays

24. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Policy Provisions of Medical Expense Plans Deductible Initial amount not covered Determined on a calendar-year or per- incident basis Participation (Coinsurance): Company pays a portion of medical expenses after a deductible Plan may include a stop- loss provision to cap out- of-pocket expenses

25. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Policy Provisions of Medical Expense Plans Internal limits Limits amount paid on certain items to usual, customary, and reasonable charges even if cost is within the norms Coordination of benefits Eliminates double payment when coverage provided under more than one policy

26. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Terms of Coverage Persons and places coveredCancellationPreexisting conditionsPregnancy and abortionMental illnessRehabilitation coverageContinuation of group coverage (COBRA) Cost Containment Provisions for Medical Expense Plans

27. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Cost Containment Provisions for Medical Expense Plans Preadmission certificationContinued stay reviewSecond surgical opinionsWaiver of co-insuranceLimitation of insurer’s responsibility

28. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Long-Term Care Insurance Involves the delivery of medical and personal care, other than hospitalization, to persons with chronic medical conditions in nursing home, assisted living community, or patient’s home

29. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Do You Need Long-Term Care Insurance? Do you have assets to preserve for dependents?Can you afford the premiums?Is there a family history of disabling disease?Are you male or female?Do you have family who can care for you?

30. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Long-Term Care Provisions and Costs Type of care Eligibility requirements Services covered Waiting period Daily benefits Renewability Benefit duration Preexisting conditions Inflation protection Premium levels

31. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Typical Provisions in Long-Term Care Insurance Policies

32. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. How to Buy Long-Term Care Insurance Buy the policy while you are healthy Buy the right types of coverage, but not more than needed Understand what the policy covers and when it pays benefits

33. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Disability Income Insurance Provides families with weekly or monthly payments to replace income lost when insured is unable to work due to an illness, injury or disease

34. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Estimating Disability Income Insurance Needs

35. © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Disability Insurance Provisions and Costs Definition of disability - “own occupation" Benefit amount and duration Probationary period Waiting period Renewability Other provisions - (COLA), guaranteed insurability option, and waiver of premium