chapter 7 insuring your health and your life. learning objectives 1. explain why health insurance is...
TRANSCRIPT
Chapter 7INSURING YOUR HEALTH AND YOUR LIFE
Learning Objectives
1. Explain why health insurance is important.
2. Describe different features of health insurance.
3. Understand the need for life insurance.
4. Discuss the ways people obtain insurance.
Objective 1 – Explain why health insurance is important
Insurance - a financial product that provides reimbursement to a person in the event of a certain type of financial loss
Health Financial product that provides
payment for medical services when people suffer a financial loss as a result of illness or injury
Limits potential liabilities
Medical care is expensive
Without it, net worth can be eliminated
Life An insurance plan that pays a
specific person(s) when the policy holder dies
Sources of Health Insurance
1. Private companies = the most expensive way to obtain insurance
2. Your employer - It’s better to get insurance through the company you work for if possible
3. The federal government has TWO programs: Medicare and Medicaid
Medicare and Medicaid
Medicare Government sponsored health insurance
plan that is funded largely by taxes most working people pay
Must be 65 and qualify for social sec.
Or disabled individuals
Medicare Part A: hospital insurance at no cost
Medicare Part B: doctor visits and other care provided outside of a hospital – recipients pay some premium*
Medicaid Government sponsored program that
provides health insurance for low income individuals
Designed for elderly , blind, disabled, and needy families with dependent children
Premium* - regular payments paid to an insurance company in return for coverage
Health Care Costs
Health care costs have become much more expensive over the years
Many employers are cutting back or dropping health insurance as a benefit for their employees
Reasons health care is increasing:
People live longer
Expensive new technology is being used in the health care field
Fraudulent insurance claims are affecting the cost of healthcare (someone submits false information in order to get a financial benefit)
Health Care Facts
Health care spending is expected to rise sharply in the years ahead
American health-care spending in 2010 average more than $8,000/person
Health-care costs are a factor in about 50% of all bankruptcies
More than 15% of Americans have no health insurance
**Health care is likely to become a bigger and more complex issue because the cost of healthcare is rising quickly and the population is aging
Objective 2: Describe different features of health insurance
Indemnity Plans Vs Managed Care
Indemnity Allow participants to seek health
care from any qualified medical provider
Managed Care Limits participants to a specific list of
providers
Medical Tourism: When Americans travel overseas for health care treatment that are less expensive in foreign countries PPACA: Patient Protection and Affordable Care Act – passed in 2010 and made a number of changes– allows young adults to remain on parent’s health insurance until 26 regardless of student status
Information
Group Plans – insurance plans that cover a large group of individuals such as employees at a company – risk is spread across entire pool of group members – everyone pays same for coverage – cheap and good coverage
Location Restrictions – some US companies only cover medical care delivered inside the US (if traveling abroad, you may want to purchase short-term health insurance for your trip)
Preexisting Conditions – health conditions that existed before one’s insurance policy was granted
Cancellation Options – companies cannot legally cancel your health insurance policy at any time (aka rescission)
Information
Deductibles – the amount of money a policy holder pays prior to the insurance company’s payment (example: once you pay your $500 deductible, your insurance company begins paying for some of the covered expenses)
the higher the deductible, the lower your premium and vice versa
Policies with very high DEDUCTIBLES and comparatively low PREMIUMS trade lower insurance costs for higher risk of out-of-pocket expenses
Good candidates for high deductibles are young, healthy people who have a low risk of serious illness or injury
Information
Coverage Limits – policies will limit the total amount they will pay for certain procedures, exclude some procedures completely (voluntary surgeries like improving eyesight or plastic surgery), or not cover experimental procedures, or an excessive amount of days in the hospital
Policies differ on Rx drugs
Study the your policy and ask a representative prior to scheduling nonemergency procedures
Co-insurance – (aka Co-pay) share of costs for covered services that the insured person is required to pay out of pocket (usually 80/20 – people will pay a certain percentage of each doctor visit and/or prescription drugs)
Co-pay – amount you pay when you visit the doctor, usually around $20, and the insurance will pay the rest
Example
John had an accident on his skateboard. His hospital bill is $40,250. Based on his insurance policy information below, how much will John have to pay?
Deductible: $250
Coinsurance: 80/20
Cap on coinsurance: $2,000
Example Continued
Deductible: $250
Coinsurance: 80/20
Cap on coinsurance: $2,000
$40, 250 – 250 (deductible) = $40,000
$40,000 x 20% = $8,000
$8,000 > John’s $2,000 cap
$2,000 cap + $250 deductible = $2,250 total
Provider Networks
HMO (health maintenance organizations) Based on negotiated agreements
with specific doctors to provide health care
People choose PCP (primary care physician) from an approved list and must be referred for any additional specialized care
PPO (preferred provider organization) Similar to HMOs but provide a larger
network of providers
Cost more than HMOs
Objective 3: Understand the need for life insurance
Life Insurance
Provides payments to a specific person/persons when the policyholder dies
The policyholder pays, the other benefits
Beneficiary – the person who receives the payment
Example: If you have a $100,000 policy and die, your beneficiary will get $100,000 (life insurance payments are not subject to income tax)
Purchased from a company, must pay premiums
Some employers provide full or partial life insurance coverage for their employees as a benefit
Role of Life Insurance
It’s a component of your financial plan
Whether you need it and how much to purchase depends on your financial goals
Most common financial goal or reason for buying life insurance is to make sure those who depend on you have financial support in the event of your death
More critical for someone who provides income for the household/the breadwinner
Types of LIFE Insurance
Whole• PERMANENT insurance
• Provides coverage for as long as the policyholder continues to pay the premiums
• This account builds in cash value (the more premiums you pay, the more money you have)
• Can serve as a source of liquidity and as a kind of investment
Term• Provided over a specific
period of time
• Usually 5-20 years
• Builds no savings, not an investment
• Has lower premiums
• You risk outliving your life insurance policy
Universal• Coverage for a specified term
• Builds savings
• Combination of whole and term
• Allows more flexibility (you can add units of term coverage, or years, and alter payments)
Objective 4: Understand the need for life insurance
Getting Insurance
Most Americans rely on THEIR EMPLOYERS to obtain health insurance
Some employer-provided coverage includes:
Disability – provides income in the event illness or injury makes it impossible to work and earn a living
Dental
Life
Term-Life
Vision
Supplemental health insurance
HIPAA and COBRA
HIPAA Health Insurance Portability &
Accountability Act
Ensures workers can continue their health insurance coverage if they switch jobs
Prohibits companies from denying new employees access to coverage based on their health or preexisting conditions
COBRA Consolidated Omnibus Budget
Reconciliation Act
Allows you to continue health insurance coverage for up to 18 months after your employment ends
You still must pay premiums that employer was paying for coverage
*The trend in recent years suggest that in comparison to present employees, future employees will be LESS LIKELY to obtain insurance coverage from their employees