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CHAPTER 9: INSURING YOUR HEALTH. 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. Historical Trends in Health Insurance Costs.
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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.
Health Insurance Options • Available to individuals or families. • Provided as group health insurance plans through various employers. 1. Private Insurance
Traditional Indemnity Plans: • Also called fee-for-service plans. • Usually offer unlimited choice of doctors and hospitals. • You pay a deductible plus a percentage of eligible costs. • Deductible can range from $100 - $2,000 • Typically plan pays 80%; insured pays 20% • Reimbursements based on “usual, customary and reasonable” (UCR) charges—what the insurer considers to be the prevailing fees within your area, not what your doctor or hospital actually charges. • Health care services are separate from insurer.
Managed 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 small co-payments for services. • No deductible
Types of Managed Care Plans: • Health Maintenance Organizations (HMOs) • Organization of hospitals, physicians, and other healthcare providers • Provide comprehensive health care to its members • Members pay monthly fee plus co-pay each time service is used • Advantages include no deductible, few or no exclusions, and not having to file insurance claim • Disadvantages include not able to choose physicians; limitations if care is needed outside geographic area
Two Main Types of 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.
Preferred Provider Organizations (PPOs) • Insurance company or provider contracts with network of physicians and hospitals • Network agrees to accept a negotiated fee for services provided to PPO customers • Advantages: Provides broader network of “approved” physicians and also allows 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.
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.
2. Government Health Insurance Plans Medicare program: • Health insurance administered by Social Security. • Available to qualified people 65 and older and to those receiving social security disability benefits. • Funded by payroll taxes paid by employers, employees, and the self-employed.
Components 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.
Components of Medicare: • Part D—Prescription Drug Coverage • Voluntary participation • Covers both brand name & generic prescriptions • All Medicare recipients are eligible • Participants pay a monthly fee, yearly deductible, & copayment • Video
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.
Workers’ compensation insurance: • Mandatory health insurance that compensates workers for job-related illness or injury. • Premiums paid by employers. • Premiums based on merit; employers who file the most claims pay the highest rates • State administered; coverage varies. Coverage typically includes: • Medical and rehabilitation expenses • Disability income • Lump-sum payments for death or dismemberment
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
Other Health Insurance Information • Health Reimbursement Account • Employer contributes to account • Employees can use it to pay for medical expenses • Usually combined with high deductible policy • At end of year, unused portion can be “rolled over” • If you change jobs, money stays with employer • Health Savings Account • Tax-free savings account • Funded by employer, employee, or both • Used for routine medical costs • Usually combined with high-deductible policy • If you change jobs, money goes with you
Medical Expense Coverage and Policy Provisions Hospitalization: • Pays a portion of per-day room and board charges • Cost of ancillary services (x-rays, lab tests, meds) • Selected other services (out-patient, in-home rehab, diagnostics, etc.) • Limit on number of days and max dollars for ancillary services
Surgical Expenses: • Pays cost of surgery either in or out of the hospital. • Reasonable & customary based on survey of previous year • Schedule of benefits—reimburse for fixed amount for particular procedure • 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. • Often first few visits with physician for any single cause will be excluded.
Major Medical Insurance: • Designed to supplement the basic coverage discussed above. • Broad coverage for illnesses and injuries of a catastrophic nature. • Amount of coverage is large. • May have lifetime limits.
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.
Dental Insurance: • Covers necessary dental care and some dental injuries. • Maximum limits are often low--$1,000 to $2,500 per patient per year • Mostly offered through group insurance plans.
Supplemental Insurance • 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 policies Guarantee a per-diem for hospital stays, but generally exclude certain illnesses.
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:
Deductible: • 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.
Internal limits: • 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.
Terms of Coverage: • 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—Physical or mental problems insured had at time policy was purchased. • Pregnancy and abortion—What is the extent of the coverage provided? Important provisions to consider include:
Mental illness—How restricted is the coverage? • Rehabilitation coverage— Provides coverage for counseling occupational therapy, etc. if you become disabled. • 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.
Cost Containment Provisions for Medical Expense Plans • Pre-admission certification—get approval from insurer before hospital admission (except for emergencies) • Continued stay review—get approval from insurer for stay that exceeds original approved limits • Second surgical opinions • Waiver of coinsurance—insurer agrees to pay 100% for outpatient in lieu of inpatient hospital stay; insurer agrees to pay 100% for generic drugs in lieu of 80% for brand-name pharmaceuticals. • Limitation of insurer’s responsibility—limit insurer’s responsibility to costs that are considered “reasonable and customary”.
Insurance Video • Overview of Health Insurance – good review
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.
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?
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.
Daily benefits — What is the daily maximum reimbursement? • Benefit duration— How long will the benefits last? • Waiting period— Once eligible, how long before the payments begin?
Renewability—Is the policy guaranteed renewable? Optional renewability are renewable only at the option of insurer. • 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?
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.
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.
Estimating Disability Needs 1. Calculate monthly take-home pay. 2. Estimate existing benefits, such as: • SocialSecurity • Other government benefits • Company disability benefits • Group disability policy benefits 3. Subtract the total of (2) from (1)
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?
Waiting period--once disabled, how long before benefits begin? • Renewability—Is it guaranteed renewable or noncancelable? • Other features—Look for cost of living adjustment (COLA), guaranteed insurability option, and waiver of premium.
