insuring your health

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Insuring Your Health#9

Importance of Health Insurance

• Protect against economic loss in the event of serious accidents or illnesses

• Protect against rising cost of health care– which is outpacing other costs

Historical Trends in Health Insurance Costs

Health Insurance Plans

Private Insurance Plans

• Available to individuals or families

• Provided as group health insurance plans through various employers

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

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

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

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 - Reimburse members similar to indemnity plan when providers are outside of network

Blue Cross/Blue Shield Plans

• Prepaid hospital and medical expense plans rather than insurance

• Originally non-profit, but 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

Government Health Insurance Plans

Possibility of National Health Care• Debate includes the possibility of health care under the

government’s control

• Some government health care plans have been in place for some time

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

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

Medicaid

• State-run public assistance program for those unable to pay for health care– Federal government provides some funding

• Eligibility and levels of coverage vary by state

• Premiums paid by employers for workers injured on the job

• State administered; coverage varies

Coverage includes:• Medical, rehabilitation

expenses• Disability income• Lump-sum payments for

death, dismemberment• Second-injury funds

Workers’ Compensation Insurance

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

Medical Expense Coverage and Policy Provisions

Hospitalization• Pays a portion of per-day

room and board charges• Use of hospital facilities• Selected other services

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

Medical Expense Coverage and Policy Provisions

Major medical insurance

• Broad coverage for illnesses and catastrophic injuries

• May have lifetime limits

Comprehensive major medical

• Combines major medical with basic hospital, surgical and physicians expense coverage

• Through group plans with low deductible

Dental services:• Covers necessary dental care and some

dental injuries.• Mostly offered through group insurance

plans.

Medical Expense Coverage and Policy Provisions

Other Types of Health Plans

• Accident policiesCover certain accidents

• Sickness and dread disease policies Coverage limited to specific disease or illness

• Hospital income policiesGuarantee a per-diem for hospital stays

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

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

Terms of Coverage

• Persons and places covered • Cancellation• Preexisting conditions • Pregnancy and abortion• Mental illness • Rehabilitation coverage • Continuation of group coverage

(COBRA)

Cost Containment Provisions for Medical Expense Plans

Preadmission certification Continued stay review Second surgical opinions Waiver of coinsurance Limitation of insurer’s responsibility

Long-Term Care Insurance

Provides for 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

Do You Need Long-Term Care Insurance?

• Do you have many assets to preserve for dependents?

• Can you afford the premiums?• Is there a family history of disabling disease?• What is your gender? • Do you have family who can

care for you?

Long-Term Care Provisions and Costs

Type of careEligibility requirements

Services covered Waiting period Daily benefits Renewability Benefit duration

Preexisting conditionsInflation protection

Premium levels

Typical Provisions in Long-Term Care Insurance Policies

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

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

Estimating Disability Income Insurance Needs

Disability Insurance Provisions and Costs

• Definition of disability - “own occupation"• Benefit amount and duration• Probationary period• Waiting period• Renewability • Other features - (COLA), guaranteed

insurability option, and waiver of premium