copyright ©2004 pearson education, inc. all rights reserved. chapter 11 health and disability...
TRANSCRIPT
Copyright ©2004 Pearson Education, Inc. All rights reserved.
Chapter 11
Health and Disability Insurance
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Chapter Objectives
• Identify and compare the types of private health care plans
• Explain the use of government health care plans
• Describe long-term care insurance
• Explain the benefits of disability insurance
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Health Insurance
• Health insurance: a type of insurance offered by private insurance companies or the government that covers health care expenses incurred by policyholders for necessary medical care
• Critical component of financial planning
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Health Insurance
• Cost of providing health care is rising
• Your health insurance decision is not whether to obtain it, but which health plan to purchase and how much coverage to purchase
• Many options available
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Private Health Insurance
• Private health insurance: health insurance that can be purchased from private insurance companies to provide coverage for health care expenses
• Types of private health insurance coverage– Hospital insurance, physician insurance,
and surgical insurance
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Private Health Insurance
• Options for purchasing private health insurance– Many employers offer health insurance as
part of benefit package• Cost usually shared between employee and
employer
– Self-employed individuals must pay entire cost of their health insurance
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Private Health Insurance
• Private health care plans– Indemnity plan: health insurance that
reimburses individuals for part or all of the expenses they incur from health care providers; individuals are free to decide whether to seek care from a primary care physician or a specialist
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Private Health Insurance
– Managed health care plan: a health insurance policy under which individuals receive services from specific doctors or hospitals that are part of the plan
• Health maintenance organization (HMO): a health insurance plan that covers health care services approved by doctors; a primary care physician provided general health services and refers patients to a specialist as necessary
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Private Health Insurance
• Preferred provider organization (PPO): a health insurance plan that allows individuals to select a health care provider and covers most of the fees for services
– Discount on charge arrangement: an arrangement in which the preferred provider organization agrees to pay a specific percentage of the health care provider’s charges
– Per diem rate arrangement: an arrangement in which the preferred provider organization pays the provider a specific sum per day a patient is hospitalized
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Private Health Insurance
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Private Health Insurance
• Maintaining private health care insurance coverage– COBRA allows continuation of coverage
provided through an employer’s plan for 18 months
– HIPPA prohibits insurance companies from denying health insurance coverage based on applicant’s health status, medical history, previous claims, or disability
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Private Health Insurance
• Expenses not covered by private insurance plans should be included in your budget– Flexible spending account: account
established by the employer for the employee to use pretax income to pay for medical expenses
• Funds cannot roll over into the next year
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Financial Planning Online: Should You Enroll in an HMO or a PPO?
• Go to: http://insurance.yahoo.com/lh/health.html
• Click on: Individual and Family Quotes
• This Web site provides an opinion on whether an HMO or a PPO would be better for you, based on your situation.
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Government Health Care Plans
• Medicare
– Provides health insurance to people over age 65
– Part A covers inpatient care in hospitals or nursing facilities and some home health
– Part B is optional coverage
– Medigap insurance: insurance provided by private insurance companies to cover medical expenses that are not covered by Medicare
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Financial Planning Online:Medicare Coverage
• Go to: http://www.medicare.gov/Basics/overview.asp
• This Web site provides an overview of services offered by Medicare, including the specific benefits that are available.
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Government Health Care Plans
• Medicaid: a federal program that provides health care to the aged, blind, disabled, and need families with dependent children
• Recipients must meet federal guidelines
• Administered on a state-by-state basis
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Long-Term Care Insurance
• Long-term care insurance: covers expenses associated with long-term health conditions that cause individuals to need help with everyday tasks– Provided by private insurance companies
– Covers care in a nursing home, assisted living facility, or at home
– Premiums quite expensive
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Long-Term Care Insurance
• Long-term care insurance provisions– Eligibility to receive benefits
– Types of services
– Amount of coverage
– Elimination period to receive benefits
– Maximum period to receive benefits
– Continued coverage
– Inflation adjustment
– Stop-loss provision
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Long-Term Care Insurance
• Other factors that affect long-term care insurance premiums– Age
– Health condition
• Reduce your cost of long-term care insurance by shopping around and comparing premiums
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Long-Term Care Insurance
• Determining the amount of coverage– Consider your family’s health history
– Consider your financial situation
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Additional Types of Health Care Plans• Dental insurance: covers part or all of the
fees imposed for dental services, including annual checkups, orthodontics and oral surgery
• Vision insurance: covers part or all of the fees imposed for optician and optometrist services, including annual checkups, glasses, contact lenses and surgery
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Disability Insurance
• Disability income insurance: insurance that provides income to policyholders in the event that they become disabled
• Definition of disability– Most liberal is “own occupation” definition
– Most restrictive is “any occupation” definition
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Disability Insurance
• Sources of disability income insurance– Individual disability insurance
– Employer disability insurance
– Insurance from Social Security• Income determined by amount of Social
Security contributions you have made
– Insurance from Workers’ Compensation
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Disability Insurance
• Disability insurance provisions– Amount of coverage
• May be a dollar amount or a percentage of your income
– Probationary period: the period extending from the time your disability income application is approved until your coverage goes into effect
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Disability Insurance
– Waiting period: the period from the time you are disabled until you begin to receive disability income benefits
– Length of time for disability benefits
– Non-cancelable provision
– Renewable provision
• Deciding on disability insurance– Contact private companies or employer
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How Health and Disability Insurance Fit Within Your Financial Plan
• Key decisions about health and disability insurance that should be included within your financial plan are:– Do you have adequate insurance to protect
your wealth?
– How much insurance should you plan to have in the future?
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Disability Insurance
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Integrating Key Concepts
• Part 1: Financial Planning Tools
• Part 2: Liquidity Management
• Part 3: Financing
• Part 4: Protecting Your Wealth
– In Chapter 10 we learned about auto and homeowner’s insurance
– In Chapter 11 we learned about health and disability insurance
– In Chapter 12 we will learn about life insurance
• Part 5: Investing
• Part 6: Retirement and Estate Planning