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CHAPTER 9:

INSURING YOUR HEALTH

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Importance of Health Insurance

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

Protect against the rising cost of health care, which is outpacing other costs in general.

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Health Insurance Options

Available to individuals or families.

Provided as group health insurance plans through various employers.

1. Private Insurance

9-4Traditional Indemnity Plans: Also called fee-for-service plans. Typically offer unlimited choice of doctors

and hospitals. You pay a deductible plus a percentage of

eligible costs. Reimbursements based on “usual,

customary and reasonable” (UCR) charges. Health care services are separate from

insurer.

9-5Managed Care Plans: Monthly payments made directly to health

care providers.

Designated group of doctors and hospitals provide services.

Plans hold down costs by controlling amount of care provided and emphasizing prevention of illness.

Charge monthly fees plus copayments for services.

9-6Types of Managed Care Plans:

Health Maintenance Organizations (HMOs)

– Group HMOs provide services for members from a central facility –

one stop shopping!

– Individual Practice Associations (IPAs) contract with physicians who operate out of their own offices and community hospitals.

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– Provide broader network of “approved” physicians and also allow use of out-of-network providers for a higher copay.

Other Managed Care Plans– Exclusive Provider Organizations (EPOs)

allow members to use only affiliated providers or bear entire cost out of pocket.

– Point-of-Service Plans reimburse members similar to indemnity plan when providers outside of network are used.

Preferred Provider Organizations (PPOs)

9-8Blue 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.

9-92. Government Health Insurance Plans

Medicare program:

Health insurance 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.

9-10Components of Medicare:Part A—Basic hospital insurance

– Provided free for those who are qualified.

– Covers hospital room and board and various other inpatient and outpatient care.

– Deductibles apply, with amounts varying according to length of stay.

Part B—Supplementary medical insurance – Optional coverage available for a monthly

premium to those eligible for Part A.

– Covers services of doctors and surgeons, lab tests, x-rays, and various other services, including some home health care.

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Medicaid:

State administered healthcare program for people of any age of low economic means.

Federal government also provides some amount of funding.

Eligibility and levels of coverage vary by state.

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Premiums paid by employers for workers injured on the job.

State administered; coverage varies.

Coverage typically includes:– Medical and rehabilitation expenses

– Disability income

– Lump-sum payments for death or dismemberment

– Second-injury funds

Workers’ compensation insurance:

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Health Insurance Decisions Evaluate your healthcare cost risk,

considering –– Medical care and rehabilitation expenses– Loss of income from disability

Determine available coverage and resources

Choose a health insurance plan

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Medical Expense Coverage and Policy Provisions

Hospitalization: Pays a portion of per-day

room and board charges, Use of hospital facilities,

and Selected other services.

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Pays cost of surgery either in or out of the hospital.

Not all procedures are covered, such as cosmetic or experimental surgery.

Physician expenses: Pays physician fees for nonsurgical

care in hospital. Includes consultation with specialists

and lab tests.

Surgical expenses:

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Broad coverage for illnesses and injuries of a catastrophic nature.

Amount of coverage is large. May have lifetime limits.

Dental insurance: Covers necessary dental care and some

dental injuries. Mostly offered through group insurance

plans.

Major medical insurance:

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Comprehensive major medical:

The most desirable coverage, it combines major medical with basic hospital, surgical and physicians expense coverages.

Usually offered through group plans with low deductible.

9-18Coverages You Don’t Need! Accident policies

Only cover certain types of accidents, usually travel-related ones.

Sickness and dread disease policies

Coverage limited to specific disease or illness; prohibited in some states.

Hospital income policiesGuarantee a per-diem for hospital stays, but generally exclude certain illnesses.

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Policy Provisions of Medical Expense Plans

Terms of Payment:

How much your medical expense plan will pay is usually determined by the following 4 provisions:

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The initial amount not covered. Determined on a calendar-year or per-

incident basis.

Participation (Coinsurance): Company pays only a portion of the

medical expenses after the deductible. Plan may include a stop-loss provision

to cap your out-of-pocket expenses.

Deductible:

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Limits amount paid on certain items to usual, customary, and reasonable charges even if cost of entire surgery or illness is within the norms.

Coordination of benefits: Eliminates double payment when

coverage provided under more than one policy.

Internal limits:

9-22Terms of Coverage:Important provisions to consider include: Persons and places covered—Who is

covered and where are you covered? Cancellation—Obtain a policy that

cannot be canceled unless premiums are not paid.

Preexisting conditions—How are they covered?

Pregnancy and abortion—What is the extent of the coverage provided?

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Rehabilitation coverage—How much is provided?

Continuation of group coverage (COBRA)—At your expense, you can continue your previous employer’s coverage for up to 18 months after you leave the job.

Mental illness—How restricted is the coverage?

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Cost Containment Provisions for Medical Expense Plans

Pre-admission certification

Continued stay review

Second surgical opinions

Waiver of coinsurance Limitation of insurer’s

responsibility

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Long-Term Care Insurance

Provides for delivery of medical and personal care, other than hospital care, to persons with chronic medical conditions due to illness or frailty.

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Do You Need Long-Term Care Insurance?

Do you have a lot of assets to preserve for your 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?

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Long-Term Care Provisions:

Type of care—What types of care are covered? Ex: nursing home, in-home.

Eligibility requirements— Gatekeeper provisions determine when insured qualifies for benefits.

Services covered—What levels of service are covered? Ex: skilled, intermediate care, custodial.

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Benefit duration— How long will the benefits last?

Waiting period— Once eligible, how long before the payments begin?

Daily benefits—What is the daily maximum reimbursement?

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Preexisting conditions—How will they be handled?

Inflation protection—Can you increase benefits with rising costs?

Premium levels—How much are they? Will they increase?

Renewability—Is the policy guaranteed renewable? Optional renewability NOT desired!

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How to Buy Long-Term Care Insurance

Buy the policy while you are healthy.

Buy the right types of coverage, but don’t buy more coverage than you need.

Understand what the policy covers and when it pays benefits.

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Disability Insurance

Provides families with weekly or monthly payments to replace income lost when the insured is unable to work due to an illness, injury or disease.

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Estimating Disability Needs

1. Calculate monthly take-home pay.

2. Estimate existing benefits, such as:

– Social Security

– Other government benefits

– Company disability benefits

– Group disability policy benefits

3. Subtract the total of (2) from (1)

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Disability Insurance Provisions:

Definition of disability—"Own Occupation" most desirable. Benefits may never kick in if you can perform “Any Occupation.”

Benefits—How much will they be and how long will they last?

Probationary period—How long after policy is issued before benefit privileges are available?

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Renewability—Is it guaranteed renewable or noncancelable?

Other features—Look for cost of living adjustment (COLA), guaranteed insurability option, and waiver of premium.

Waiting period—Once disabled, how long before benefits begin?

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THE END!