1. Insuring Your Health and Your Life
Chapter 7
Insuring Your Health and Your Life

2. Learning Objectives Explain why health insurance is important.
Describe different features of health insurance.
Understand the need for life insurance.
Discuss the ways people obtain insurance.

3. Objective 1 – Explain why health insurance is important

4. Insurance - a financial product that provides reimbursement to a person in the event of a certain type of financial loss
Health
Life
Financial product that provides payment for medical services when people suffer a financial loss as a result of illness or injury
Limits potential liabilities
Medical care is expensive
Without it, net worth can be eliminated
An insurance plan that pays a specific person(s) when the policy holder dies

5. Sources of Health Insurance
Private companies = the most expensive way to obtain insurance
Your employer - It’s better to get insurance through the company you work for if possible
The federal government has TWO programs: Medicare and Medicaid

6. Medicare and Medicaid Medicare Medicaid
Government sponsored health insurance plan that is funded largely by taxes most working people pay
Must be 65 and qualify for social sec.
Or disabled individuals
Medicare Part A: hospital insurance at no cost
Medicare Part B: doctor visits and other care provided outside of a hospital – recipients pay some premium*
Government sponsored program that provides health insurance for low income individuals
Designed for elderly , blind, disabled, and needy families with dependent children
Premium* - regular payments paid to an insurance company in return for coverage

7. Health Care Costs
Health care costs have become much more expensive over the years
Many employers are cutting back or dropping health insurance as a benefit for their employees
Reasons health care is increasing:
People live longer
Expensive new technology is being used in the health care field
Fraudulent insurance claims are affecting the cost of healthcare (someone submits false information in order to get a financial benefit)

8. Health Care Facts
Health care spending is expected to rise sharply in the years ahead
American health-care spending in 2010 average more than $8,000/person
Health-care costs are a factor in about 50% of all bankruptcies
More than 15% of Americans have no health insurance
**Health care is likely to become a bigger and more complex issue because the cost of healthcare is rising quickly and the population is aging

9. Objective 2: Describe different features of health insurance

10. Indemnity Plans Vs Managed Care
Allow participants to seek health care from any qualified medical provider
Limits participants to a specific list of providers
Medical Tourism: When Americans travel overseas for health care treatment that are less expensive in foreign countries
PPACA: Patient Protection and Affordable Care Act – passed in 2010 and made a number of changes– allows young adults to remain on parent’s health insurance until 26 regardless of student status

11. Information
Group Plans – insurance plans that cover a large group of individuals such as employees at a company – risk is spread across entire pool of group members – everyone pays same for coverage – cheap and good coverage
Location Restrictions – some US companies only cover medical care delivered inside the US (if traveling abroad, you may want to purchase short-term health insurance for your trip)
Preexisting Conditions – health conditions that existed before one’s insurance policy was granted
Cancellation Options – companies cannot legally cancel your health insurance policy at any time (aka rescission)

12. Information
Deductibles – the amount of money a policy holder pays prior to the insurance company’s payment (example: once you pay your $500 deductible, your insurance company begins paying for some of the covered expenses)
the higher the deductible, the lower your premium and vice versa
Policies with very high DEDUCTIBLES and comparatively low PREMIUMS trade lower insurance costs for higher risk of out-of-pocket expenses
Good candidates for high deductibles are young, healthy people who have a low risk of serious illness or injury

13. Information
Coverage Limits – policies will limit the total amount they will pay for certain procedures, exclude some procedures completely (voluntary surgeries like improving eyesight or plastic surgery), or not cover experimental procedures, or an excessive amount of days in the hospital
Policies differ on Rx drugs
Study the your policy and ask a representative prior to scheduling nonemergency procedures
Co-insurance – (aka Co-pay) share of costs for covered services that the insured person is required to pay out of pocket (usually 80/20 – people will pay a certain percentage of each doctor visit and/or prescription drugs)
Co-pay – amount you pay when you visit the doctor, usually around $20, and the insurance will pay the rest

14. Example
John had an accident on his skateboard. His hospital bill is $40,250. Based on his insurance policy information below, how much will John have to pay?
Deductible: $250
Coinsurance: 80/20
Cap on coinsurance: $2,000

15. Example Continued Deductible: $250 Coinsurance: 80/20
Cap on coinsurance: $2,000
$40, 250 – 250 (deductible) = $40,000
$40,000 x 20% = $8,000
$8,000 > John’s $2,000 cap
$2,000 cap + $250 deductible = $2,250 total

16. Provider Networks HMO (health maintenance organizations)
PPO (preferred provider organization)
Based on negotiated agreements with specific doctors to provide health care
People choose PCP (primary care physician) from an approved list and must be referred for any additional specialized care
Similar to HMOs but provide a larger network of providers
Cost more than HMOs

17. Objective 3: Understand the need for life insurance

18. Life Insurance
Provides payments to a specific person/persons when the policyholder dies
The policyholder pays, the other benefits
Beneficiary – the person who receives the payment
Example: If you have a $100,000 policy and die, your beneficiary will get $100,000 (life insurance payments are not subject to income tax)
Purchased from a company, must pay premiums
Some employers provide full or partial life insurance coverage for their employees as a benefit

19. Role of Life Insurance It’s a component of your financial plan
Whether you need it and how much to purchase depends on your financial goals
Most common financial goal or reason for buying life insurance is to make sure those who depend on you have financial support in the event of your death
More critical for someone who provides income for the household/the breadwinner

20. Types of LIFE Insurance
Whole
Term
Universal
PERMANENT insurance
Provides coverage for as long as the policyholder continues to pay the premiums
This account builds in cash value (the more premiums you pay, the more money you have)
Can serve as a source of liquidity and as a kind of investment
Provided over a specific period of time
Usually 5-20 years
Builds no savings, not an investment
Has lower premiums
You risk outliving your life insurance policy
Coverage for a specified term
Builds savings
Combination of whole and term
Allows more flexibility (you can add units of term coverage, or years, and alter payments)

21. Objective 4: Understand the need for life insurance

22. Getting Insurance
Most Americans rely on THEIR EMPLOYERS to obtain health insurance
Some employer-provided coverage includes:
Disability – provides income in the event illness or injury makes it impossible to work and earn a living
Dental
Life
Term-Life
Vision
Supplemental health insurance

23. HIPAA and COBRA HIPAA COBRA
Health Insurance Portability & Accountability Act
Ensures workers can continue their health insurance coverage if they switch jobs
Prohibits companies from denying new employees access to coverage based on their health or preexisting conditions
Consolidated Omnibus Budget Reconciliation Act
Allows you to continue health insurance coverage for up to 18 months after your employment ends
You still must pay premiums that employer was paying for coverage
*The trend in recent years suggest that in comparison to present employees, future employees will be LESS LIKELY to obtain insurance coverage from their employees