Chapter 9

CHAPTER 9:

INSURING YOUR HEALTH

Need for 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.

Types of Health Care Plans

Also called fee-for-service plans, you typically choose the doctors and hospitals, pay for the service, and then get paid back by the insurance company.

Health care services are separate from insurer.

1. Traditional Indemnity Plans:

2. Managed Care Plans: Users contract with and make monthly

payments directly to health care providers.

A designated group of doctors and hospitals provide services.

Cost-efficient strategies are utilized, including controlling amount of care provided and emphasizing prevention of illness.

No deductibles are paid, just low copayments for services.

Types of Managed Care Plans: Health Maintenance Organizations (HMOs)

Comprehensive services, sometimes at one facility.

Individual Practice Associations (IPAs)

Physicians operate out of their own offices and community hospitals.

Preferred Provider Organizations (PPOs)

Broader network of “approved” physicians and allow use of out-of-network providers.

Providers of Health Insurance

Insurance companies

Managed care organizations

Blue Cross/Blue Shield (prepaid expense plans)

Group plans (may incorporate any of the above as well as self insurance)

1. Private Insurers:

2. Government Agencies:

Part A—Basic hospital insurance for those who are qualified.

Part B—Supplementary medical insurance; pays doctor

Social Security’s Medicare program

– Funded by Social Security taxes.

– Available to qualified people 65 and older and to those receiving SS disability benefits.

Coverage includes:

– Medical and rehabilitation expenses

– Disability income

– Lump-sum payments for death or dismemberment

– Second-injury funds

Workers’ compensation insurance

Premiums paid by employers for workers injured on the job.

3. Other sources of health care:

Homeowner’s and automobile insurance policies contain limited amounts of medical coverage.

Other government health programs at the federal, state and local levels, including Medicaid and programs for military personnel.

Types of Medical Expense Coverages

Hospital insurance:

Pays a portion of per-day room and board charges

Use of hospital facilities

Selected other services

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

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

Physicians expense insurance: Pays physician fees for nonsurgical care

in hospital.

Includes consultation with specialists and lab tests.

Surgical expense insurance:

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:

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.

Coverages 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 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:

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:

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:

Terms 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.

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.

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.

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?

LTC Insurance Provisions

Location of care

Triggering conditions

Renewable

Level premiums

Inflation protection

Wavier of premium

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.

Renewability—Is it guaranteed renewable or noncancelable?

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

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

THE END