20 - 1copyright 2008, the national underwriter company types of individual health insurance coverage...

20 - 1Copyright 2008, The National Underwriter Company

Types of Individual Health Insurance Coverage

What is it? Provides reimbursement for certain medical & hospital

expenses Generally issued by an insurance company Two major types

Prepaid plan Healthcare providers paid before care is delivered Health Maintenance Organization – most common type

Postpaid plans Care providers and insureds reimbursed after care has been

received

Chapter 20Risk Management For Financial Planners


When is the use of this tool indicated? Basic health insurance coverage essential part of

financial security In 2002

52.2% had health insurance through employer 16.2% were uninsured

In 2005 15.9% were uninsured

Tax implications Premiums are deductible as a medical expenses

In excess of 7.5% of their adjusted gross income Benefits paid are not taxable to the covered individual




Design features Hospital-Surgical Coverage

Coverage for hospitalization and surgery Certain expenses that are covered are defined in the policy

Hospital room and board Lab services X-rays and medicine nurses, radiologists, anesthetists Physician in-hospital charges Outpatient services Maternity services




Design features Benefits

Usually expressed as a dollar amount per day or Usually and customary charge for a particular service

Surgical schedule Fee that imposes an upper limit for surgical procedures

Major Medical Coverage Supplemental

Supplements the basic hospital-surgical expense plan




Design features (cont’d) Major Medical Coverage (cont’d)

Comprehensive Wraps into a single plan all coverages provided by both the basic

hospital-surgical expense plan and the supplemental plan Streamlined and easier to use Does not have the overlapping of coverage from several different

policies

Cover more services and pays greater benefits than the basic coverages

Policy has exclusions and limitations for various services Pre-existing conditions Usual and customary expense limitations





Policy deductibles Pre-defined covered expense that the policyholder must pay out of

pocket Example – Policy holder has a deductible of $500 and incurs a

covered expense of $1,200 Policy holder pays the first $500 of the expenses and the

insurance company pays most of the remaining $700 of expenses

Usually one deductible per policyholder per calendar year. After the deductible has been net, the insurance company pay

all the remaining expenses





Co-insurance Policyholder and insurance company pay a portion of each covered

expense after the policy deductible has been met Example

20%/80% split – the insured pays 20% of the expenses after the deductible and the insurance company pays the remaining 80%

Overall coinsurance limit for the insured A maximum “out-of pocket” expense limit paid by the insured

Example - $500 deductible , then 20% / 80% coinsurance for the next $10,000 in expenses

Out-of-pocket maximum for the insured = $2,500





Maximum benefit limitation for policy Maximum policy will pay the insured during their lifetime Typically $1,000,000 or $2,000,000 or as high as $5,000,000

Traditional Indemnity Pays a dollar amount for each day the insured is hospitalized

($100 to $400) Paid in addition to other coverages




Health Maintenance Organizations (HMO) Organization of physicians and other health care

providers that provide health care on a pre-paid basis Alternative to traditional health insurance Advantages

Covers more types of health care services than traditional coverages

Lower co-payments and deductibles

Disadvantages Must use a network provider Specialist must be referred by your primary care physician




Preferred Provider Organizations (PPO) Type of managed care organization Contracts between the sponsor and health care

providers Can also be a group of health care providers who

contract with an insurer to treat policy holders according to a set fee schedule




Preferred Provider Organizations (PPO) Examples

A single hospital and it’s practicing physicians that contract with a large employer

A national network of physicians, hospitals and labs that contract with and insurer or employer groups

Using a PPO provides discounts from standard fees and incentives for using them as opposed to someone outside their network




Medicare Supplemental Coverage Medicare Part A

Pays for hospitalization, skilled nursing facilities, home health services and hospice care

Proved without cost to everyone 65 and older who is eligible for social security

Hospitalization co-pays and deductibles Days 1 through 60 – Insured pays a daily deductible Days 61 through 90 - Insured pays a daily co-payment Days 91 Plus – Insured pays 100%.

Insured could access a lifetime reserve of 60 days where he/she pays a co-payment instead of all the expenses at this point.




Medicare Supplemental Coverage (cont’d) Medicare Part A (cont’d)

Skilled nursing care Pays for skilled nursing home care up to the first 100 days of care

Days 1 through 20 – Insured pays Zero days 21 through 100 – Insured pays a Daily deductible Days 100 Plus – Insured pays 100%

Medicare Part B Voluntary – requires insured pay a premium Coverage for doctor’s bills, surgical procedures, outpatient

services and medical supplies




Medicare Supplemental Coverage (cont’d) Medigap - 12 standardized types of supplemental policies

Plans “A” through “J” provide core benefits plus optional benefits Plan “A” – Core benefits

Co-insurance days 61 through 90 for hospitalization Co-insurance days 91 through 150 for hospitalization Hospital insurance expenses for an extra 365 days in the hospital Part A and part B deductible for the first 3 pints of blood Part B co-insurance (20% of allowable charges)

Plans “K” and “L” offer catastrophic coverage without the core benefit package

Open enrollment period Six months after the insured turns age 65 Policies are guaranteed renewable




Alternatives Self funding

Save enough to pay medical expenses out of pocket Unrealistic to expect a individual to be able to set aside enough

to cover possible medical bills

Group health insurance coverage Provided through an employer or association Cost is usually shared between and employer and employee Open-enrollment period



20 - 1copyright 2008, the national underwriter company types of individual health insurance coverage...

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