Bài giảng Personal Financial - Chapter 9: Health and Disability Income Insurance

9 Health and Disability Income InsuranceEases the financial burden people may experience as a result of illness or injury (pay a premium to transfer risk of loss)Medical expense insurance- pays actual medical costs Disability income insurance- provides replacement incomeGroup and individual health insurance coverage availableCOBRA Requires many employers to offer employees and dependents the option to continue their group coverage for a set period of time following a layoffThe Health Insurance Portability and Accountability ActEstablished federal portability standards If you change jobs, you need not lose your health insurance9-*Sources of Health Care PlansHealth Care Plan- generic name for any program that pays or provides reimbursement for health care expensesGroup Health Care Plan – health coverage sold collectively to an entire group of persons rather than to individualsOpen Enrollment Period – during this time, you can begin or make changes in coverage or switch among alternative plansRequirements are generally waived for family changes (e.g., birth of a child, adoption, marriage)Health Insurance Sources Employers Private Market (Individual/Family Policy) Government-Facilitated Exchanges Government ProgramsGroup Plans:Covers most individuals Usually employer sponsored (also unions, trade groups)Employer pays part or most of costCoordination of Benefits: combine benefits from >1 planBenefits received from all sources limited to 100% of allowable medical expensesMarried couples/partners need to considerGroup Health Insurance9-*Types of Health Insurance CoverageHospital IndemnityPays you a fixed amount for each day you are hospitalizedDoes not cover medical costsSupplement to the other plansDental Expense InsuranceCovers exams, cleaning, x-rays, fillings, root canals, and oral surgeryVision CareExams, contact lenses, and glassesDread Disease PoliciesPays out for very specific conditions (e.g., cancer)Illegal in many statesLong-Term Care InsuranceVirtually unknown 25-30 years agoCovers daily help if seriously ill or disabledNursing home or in-home care9-*Health Literacy QuizDo You Understand Health Insurance? Which of the following describes an (in-network) Out-of-Pocket Maximum? Assume that all the responses refer to in-network expenses.After meeting the out-of-pocket maximum, all medical expenses are covered 100% After meeting the in-network out-of-pocket maximum, copays must still be paid, but all other medical expenses are covered 100% After meeting the out-of-pocket maximum, you must pay 100% of your medical expenses I’m not sure Which of the following best describes Coinsurance?A specified dollar amount you pay for a specific service The total amount you are required to pay until you reach your deductible The percent of the cost of medical services that the insurer pays The amount the employer contributes to paying for your health premium I’m not sure Which of the following best describes a Copayment (Copay)?A specific dollar amount you pay for a specific service A specific dollar amount your insurer pays for a specific service A fixed percent of the cost of a procedure that you have to pay (insurer pays the remainder) The amount your employer contributes to paying for your health premium I’m not sure Which best describes a Deductible? An amount deducted from your paycheck to pay for your insurance premium The amount deducted (covered) out of your total yearly medical expenses The amount you pay before your insurance company pays benefits The amount you pay before your health expenses are covered in full I’m not sure  Policy Features That Limit CoverageBenefit coordination clausesDeductibleElimination periodCo-paymentCo-insurancePolicy limitPrivate Health Care PlansHealth Maintenance Organization (HMO)Contracts with selected care providersRequires a PCP and referralsDoes not pay for out of network careFocus is on prevention and wellnessUsually pay small copayment to see doctor9-*Private Health Care PlansPreferred Provider Organization (PPO)Network of providers to choose fromCosts more than an HMOMore choices, fewer restrictions than an HMOIf you go to a non-PPO provider, you pay moreExample: NJ Direct for state of NJ employeesPoint-of-Service (POS)Combines features of HMOs and PPOs (referrals, out of network claims)Exclusive Provider Organization (EPO)Exclusive network of providers; does not require PCP and referralsEmployer Self-Funded Health PlansCompany runs self-insured insurance programCollects premiums from employees; pays medical benefits as needed9-* Consumers are mandated to purchase insurance Creates Marketplaces (Exchanges) where consumers can choose among affordable plans, offering tax credits to some who qualify by income Builds on current employer-employee fringe benefit insurance arrangement and mandates large employers to offer adequate and affordable plans Intended to expand states’ Medicaid programs to include all individuals and families under 138% of FPL ($15,856 for individual, $32,499 for family of four (2013)ACA Goal: Decreasing the Number of Uninsured Americans Requiring insurance companies to take all seeking insuranceNo more exclusions for consumers who have pre-existing conditions No more cancellation of policies for someone being too sickNo more lifetime maximums on the amount paid for care for essential benefits No more annual maximums on the amount paid for care for essential benefits ACA Goal: Decreasing the Number of Uninsured Americans The Consumer ProtectionsEssential Health BenefitsQualified Health Plans in the Marketplace must cover:Ambulatory patient servicesMaternity and newborn careEmergency servicesPrescription drugsMental health and substance use disorder servicesLaboratory servicesRehabilitative and habilitative services and devices Chronic disease managementPreventive and wellness servicesPediatric services, including oral and vision careDifferent Levels of Plans4 Levels of Coverage – “The Metals”: Bronze, Silver, Gold, and PlatinumEach has a different value for level of coverageBronze: 60%. Silver: 70%. Gold: 80%. Platinum: 90% (Refers to adequacy values: how much plan vs. insured pays)Any costs not covered by the plan are paid by individuals through deductibles, co-pays, co-insurance (not including monthly premium)Each plan level must cover the same set of minimum essential health benefitsWhat differs is amount of cost-sharing requiredExample: The bronze plan will have the least generous coverage (60%) with more out-of-pocket costs for more informationEmployer- based insurance is deemed affordable if the annual premium for a self-only plan (not a family plan) costs less than 9.5% of a person’s annual household gross income.Example: $4,000 paid by an insured person with $10,000 of total health care expensesInsurance AdequacyBy March 31, 2014, Americans must be enrolled in a health insurance planWith few exceptions, if you are not insured, and income is >138% of the FPL, you will be required to pay a penalty (tax). Penalty for no coverage will rise from $95 for adults or 1% of family income, whichever is greater (2014) to $695 or 2.5% of income, whichever is greater (2016) Children are required to be insured throughPublic insurance (e.g. state’s Children’s Health Insurance Program) or parents’ obligations (employer or private purchase) Fines for uninsured children are half that of adults up to a family maximum of $285 for 2014.and $2,085 in 2016Tax will be assessed on federal income tax returnMay need to adjust estimated payments and/or W-4ACA Provisions for Consumers: Individual MandateCompare Available OptionsBenefitsPremier PlanStandard PlanIn Network Deductible$500 / $1,000$1,000 / $2,000Out of Network Deductible$1,000 / $2,000$1,500 / $3,000In – Network Co-Pay perOffice VisitCo-insurance$20 PCP/ $40 Specialist90% after deductible$30 PCP /$50 Specialist80% after deductibleOut of Network Co-insurance70% after deductible60% after deductible*Compare Available OptionsTier 1Tier 2Tier 3 RETAIL$10 Co-pay30 Day Supply$30 Co-pay30 Day Supply$50 Co-pay30 Day Supply MAIL ORDER$20 Co-pay90 Day Supply$60 Co-pay90 Day Supply$100 Co-pay90 Day SupplyUniversity of MaryLand Extension Smart Choice Health Insurance Workbookhttps://www.extension.umd.edu/sites/default/files/_images/programs/insure/My%20Smart%20Choice%20Health%20Insurance%20Guide%204-3-13.pdf Uses “Rule of Three” approach (3 options)*Health Care Savings AccountsHealth Spending Accounts (HSAs)Money contributed to pre-tax dollar accountMust have a high-deductible policyHealth Reimbursement Accounts (HRAs)Also tied to high-deductible policiesFunded solely by employerUnused funds carried over to next yearFlexible Spending Accounts (FSAs)Workers contribute pre-tax dollars Funds managed by employerUnused funds forfeited at year-end9-*Government Health Care ProgramsMedicareFederally funded health insurance program Covers those age 65+ and certain disabled persons Does not cover everythingPatient liable for the difference in costsProgram in financial trouble; needs changes4 parts: A, B, C, DMedicaid- health care program for the poor that is jointly administered and funded by the federal and state governments9-*MEDICAREPart A: Hospital insurance helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care, and hospice care (paid for by workers’ payroll deductions)Part B: Medical insurance helps pay for doctors’ services and many other medical services and supplies not covered by hospital insuranceBeneficiaries pay a monthly premium (varies according to income)Part C:Medicare Advantage plans available in many areasThose with Parts A and B can choose to receive all of their health care services through one of these provider organizations under Part C Part D: Prescription drug coverage helps pay for medications doctors prescribe for treatment9-*Disability Income Insurance Designed to protect against loss of income; protects your “earning power”Most overlooked type of insuranceYoung, healthy people don’t consider the risks related to their future earning potentialProvides regular cash income lost by employees as the result of an accident or illness 9-*Sources of Disability IncomeWorkman’s CompensationDisability from on-the-job accident or illness Employer PlansShort or long-term group disability policy Social SecurityCovers total disability lasting > 12 months Starts in the 6th monthStrict definition of disability to qualifyPrivate Income Insurance ProgramsSupplements other disability income sourcesNormally provides 40-60% of income (up to 75%)9-*Disability Income Insurance Trade-OffsPolicy’s definition of disabilityOwn Occupation- can no longer perform previous jobAny Occupation- can’t work at any jobWaiting or elimination PeriodDuration of benefitsAmount of benefitsAccident and sickness coverage (want payment for both; accidents are not the only cause of disability!)Guaranteed renewable (guarantees coverage as long as you pay your premium, but premiums can change for you within a class of insureds)Noncancellable- Better but more expensive; no future change in premiumCost-of-Living Adjustments (adjusts benefit for inflation)Partial benefits (pays benefit if person can only work part-time)9-*What Can You Do to Reduce Personal Health Care Costs ?Eat a balanced diet Keep weight under controlAvoid smoking Don’t drink excessivelyGet sufficient rest, relaxation, and exerciseDrive carefully Protect yourself from medical ID theftCarefully review health care feesCommunity health education programs9-*Wrap UpChapter QuizConcept Check 9-1- True or False? Concept Check 9-2- Health Insurance TerminologyConcept Check 9-3- What Trade-offs Would You Consider? Concept Check 9-5- Disability Insurance Terminology