chapter 11 health, disability , and long-term care insurance
DESCRIPTION
Chapter 11 Health, Disability , and Long-Term Care Insurance. Chapter 11 Learning Objectives. Explain why the costs of health insurance and health care have been increasing Define health insurance and disability income insurance and explain their importance in financial planning - PowerPoint PPT PresentationTRANSCRIPT
Chapter 11
Health, Disability , and Long-Term Care Insurance
Chapter 11
Health, Disability , and Long-Term Care Insurance
Chapter 11Learning Objectives1. Explain why the costs of health insurance and
health care have been increasing
2. Define health insurance and disability income insurance and explain their importance in financial planning
3. Analyze the benefits and limitations of the various types of health care coverage
4. Evaluate private sources of health insurance and health care
5. Appraise the sources of government health care programs
6. Recognize the need for disability income insurance
2
Health Care CostsObjective 1: Explain why costs of health
insurance and health care have been increasing
The US has the highest per capita medical expenditures of any industrialized country in the world
$7,352 health care costs per person in 2007
This amount is twice as much spent on health care as the average for the 24 industrialized countries in Europe and North America
3
Health Care Costs (continued)
Medical expenditures were 6% of the GDP in 1965, but rose to 13.6 of our GDP in 1997 and are predicted to be 19.6% in the next 8 years
High administrative costs11% of health care dollar vs. 1% in Canada
4
Health Care Costs (continued)
WHY DOES HEALTH CARE COST SO MUCH?
Use of sophisticated, expensive technologies
Duplication of tests and technologies
Increases in the variety and frequency of treatments
Increasing number and longevity of elderly people
Regulations that result in cost shifting rather than cost reduction
5
Health Care Costs (continued)
WHY DOES HEALTH CARE COST SO MUCH (continued)
Increasing number of accidents, crimes that require emergency services
Limited competition, restrictive work rules in the health care delivery system
Labor intensiveness, rapid earnings growth for health care professionals
Innovative treatments for AIDS, cancerBuilt in inflation in health care delivery systemMalpractice InsuranceAging baby boomers
6
Health Care Costs (continued)
WHAT IS BEING DONE ABOUT THE HIGH COSTS OF HEALTH CARE?
Careful review of fees and charges
Establish incentives for... Preventive careServices provided out of the hospital where
medically acceptable
Involve community in balancing health care needs, health care resources
Encourage prepaid group practices
Support community health education programs so people take better care of themselves
7
Health Care Costs (continued)
WHAT CAN YOU DO TO REDUCE PERSONAL HEALTH CARE COSTS?
Stay well - focus on prevention
Eat a balanced diet, keep your weight under control
Avoid smoking, don’t drink to excess
Get enough rest, relaxation, and exercise
Drive carefully, watch out for accident and fire hazards in the home
8
Health Insurance and Financial PlanningObjective 2: Define health insurance and
disability income insurance and explain their importance in financial planning
Over 45 million Americans have no health insurance
An older student population is not covered by their family’s policy. 40% are older than age 25
Health insurance limits the financial burdens people suffer due to illness or injury
It’s part of your overall risk management plan to safeguard your family’s economic securityDisability income insurance protects your
most valuable asset - your ability to earn an income
9
Health Insurance and Financial Planning (continued)
GROUP HEALTH INSURANCEGroup plans comprise more than 90% of all
health insurance
Most group plans are employer sponsored; employer pays part or most of the cost
1996 Health Insurance Portability and Accountability Act provides federal portability standards, nondiscrimination in health insurance, and guaranteed renewabilityIf you changes jobs you need not lose your
health insurance
Individual insurance is also available 10
Health Insurance and Financial Planning (continued)
You can supplement your group policy
The coordination of benefits provision in a policy says that benefits received from all sources are limited to 100% of allowable medical expenses
COBRA requires many employers to offer employees and dependents the option to continue their group coverage for a set period of time following a divorce
11
Types of Health Insurance CoverageObjective 3: Analyze the benefits and
limitations of the various types of health care coverage
TYPES OF MEDICAL COVERAGE
• Hospital expense insurance - Hospital room and board and other charges
• Surgical expense insurance
- Surgeon's fee for an operation
• Physician expense insurance
- Pays for physician’s care that does not include surgery, such as office visits, lab tests and X-rays
12
Types of Health Insurance Coverage (continued)
Major medical expense insuranceCovers expenses for a serious injury or long-
term illness. Has a deductible, coinsurance, and a stop-loss provision
Comprehensive major medical insurance Low deductible offered without a separate,
basic plan. Covers hospital, surgical, and other bills
Dread disease and cancer insurance policiesFocus on unrealistic fears, and only pays out
for very specific conditions. Often sold by people working on commission, and poor value 13
Types of Health Care Coverage(continued)
Hospital indemnityPays a fixed amount for each day you are in a
hospital. Best for people in high-risk groups
Dental expense insuranceCovers exams, cleaning, x-rays, fillings, root
canals, and oral surgery
Vision careExams, contact lenses, and glasses
Long term care insuranceGrowing faster than any other form of
insurance 14
Types of Health Care Coverage (continued)
MAJOR PROVISIONS IN A HEALTH INSURANCE POLICY
EligibilityVaries with age, marital status, and dependency
Assigned benefitsInsurance pays your doctor or hospital directly
Internal limitsFixed amount per day for a hospital room
Co-paymentCost sharing in the form of a flat dollar amount
you pay, such as $15.00-$30.00 per office visit or $10.00-$25.00 per prescription
Service benefits vs. fixed $ amount15
Types of Health Care Coverage(continued)
Benefit limits - maximum $ amount or maximum # of days in the hospital
Exclusions and limitations
Coordination of benefits - coverage under more than one policy
Guaranteed renewable
Cancellation and termination - explains the circumstances
16
Types of Health Care Coverage (continued)
HEALTH INSURANCE TRADE-OFFS
Reimbursement versus indemnity
Internal limits versus aggregate limits
Deductibles and coinsurance
Out-of-pocket limit, or stop-loss
Benefits based on reasonable and customary charges
Health information online can provide information when you are comparing policies 17
Types of Health Care Coverage (continued)
The Kelleher family has health
insurance coverage that pays 80
percent of out-of-hospital expenses
after a $500 deductible per person. If
one family member has doctor and
prescription medication expenses of
$1,100, what amount would the family
and insurance company pay? 18
Types of Health Care Coverage (continued)
A health insurance policy pays 65
percent of physical therapy cost after a
$200 deductible. In contrast, an HMO
charges $15 per visit for physical
therapy. How much would a person
save with the HMO if he or she had 10
physical therapy sessions costing $50
each? 19
Private Sources of HealthInsurance and Health Care
Objective 4: Evaluate private sources of health insurance and health care
Private insurance companies (Aetna, Cigna)Individual policyGroup policy sold to an employer
Hospital and Medical service plansBlue Cross - hospital care benefitsBlue Shield - surgical and medical services
benefits
20
Private Sources of HealthInsurance and Health Care (continued)
Managed carePrepaid health plan
Health Maintenance OrganizationContracts with selected care providersFixed pre-paid monthly premiumFocus is on prevention and wellnessBasic and supplemental services
21
Private Sources of HealthInsurance and Health Care (continued)
Preferred Provider OrganizationSeveral providers to choose fromCosts more than a HMO, but you have more
choices, fewer restrictionsIf you go to a non PPO provider, you pay
more
Home Health Care AgenciesSupervision and management of preventive
medical care in a home setting
22
Private Sources of HealthInsurance and Health Care (continued)
Employer Self-funded Health PlansCoverage made available by plans that
employers, labor unions, fraternal societies, or communities administer
Self-funded plans often do not have the assets like private insurance companies do
New Health Care AccountsHealth Savings AccountsHealth Reimbursement AccountsFlex Spending Accounts
23
Government Health Care ProgramsMedicare - federal program for those age 65
and older, and certain disabled persons
Part A – Hospital Insurance - Covers inpatient hospital care
Part B – Medical insurance - Doctor’s visits and prescriptions
Part C - Medicare Advantage program
Part D – Medicare Prescription Drug benefit
24
Government Health Care Programs(continued)
Medigap - may pay what Medicare doesn’t
Medicaid
Low income people of all ages
State administered with federal guidelines
25
Government Consumer Health Information Web Sites
www.hhs.gov (Health Finder)
www.nlm.nih.gov (Medline Plus)
www.nih.gov (NIH Health Information)
26
Disability Income InsuranceObjective 6: Recognize the need for
disability income insurance
Disability is more likely than death at any age
Young, healthy people don’t think about risks related to all their future earning potential
Provides regular cash income lost as the result of an accident, illness or pregnancy
If you become disabled your income drops but your expenses go up
27
Disability Income Insurance(continued)
Carefully read a policy’s definition of disabilityMay only pay if you can’t work at any jobLook for a policy that pays if you are unable to
work at your regular job
Aim for a benefit that when added to your other income will equal 60-70% of your gross pay
How long do benefits last? To age 65? For life?
How long is the waiting period? 30 days? 90 days?
Look for a policy that is both noncancelable and guaranteed renewable.
28
Disability Income Insurance (continued)
SOURCES OF DISABILITY INCOME
Employer Group disability policy may be short or long
term
Social SecurityCovers total disability that lasts more than
twelve months
Workman’s CompensationIf you are injured at work or your injury is a
result of your type of employment
Disability insuranceBenefits limited to 70-80% of your take home
pay
29