11 HEALTH, DISABILITY, AND LONG-TERM CARE INSURANCE CHAPTER OVERVIEW Planning a health insurance program needs careful study because the protection should be shaped to the needs of the individual or the family. However, the task is simplified for many families because a foundation for their coverage is already provided by group health insurance at work. We begin the chapter by explaining why the costs of health insurance and health care have been increasing. Then we define health insurance and disability income insurance and explain their importance in financial planning. Next we analyze the benefits and limitations of the various types of health insurance coverage. Private sources of health insurance and health care are presented next, with a complete coverage of health maintenance organizations (HMOs). Then we discuss the sources of government health programs, such as Medicare and Medicaid. Finally, we explore the sources of disability income and offer suggestions on how to calculate disability income insurance requirements. LEARNING OBJECTIVES CHAPTER SUMMARY After studying this chapter, students will be able to: My Life LO 11.1 Explain why the costs of health insurance and health care are increasing. Health care costs have gone up faster than the rate of inflation. Among the reasons for high and rising health care costs are the use of high-priced equipment and personnel, increases in the variety and frequency of treatments, innovative but costly treatment of some illnesses, third-party payments, too many hospital beds and too much duplication of facilities, and the lack of incentive to make the most economical use of health care services. My Life LO 11-2 Define health insurance and disability income insurance and explain their importance in financial planning. Health insurance is protection that provides payment of benefits for covered sickness or injury. Disability income insurance protects your most valuable asset—your ability to earn income. My Life LO 11-3 Analyze the benefits and limitations of the various types of health care coverage. Five basic types of health insurance are available under group and individual policies: hospital expense insurance, surgical expense insurance, physician’s expense insurance, major medical expense insurance, and comprehensive major medical insurance. The benefits and limitations of each policy differ. Ideally, you should get a basic plan and a major medical supplementary plan, or a comprehensive major medical policy that combines the values of both these plans in a single policy. 11-1 LEARNING OBJECTIVES CHAPTER SUMMARY My Life LO 11-4 Evaluate private sources of health insurance and health care. Health insurance and health care are available from private insurance companies, hospital and medical service plans such as Blue Cross/Blue Shield, health maintenance organizations (HMOs), preferred provider organizations (PPOs), exclusive provider organizations (EPDs), point-of-service plans (POSs), home health care agencies, and employer self-funded health plans. My Life LO 11-5 Appraise the sources of government health care programs. The federal government and state governments offer health coverage in accordance with laws that define the premiums and benefits. Two well-known government health programs are Medicare and Medicaid. My Life LO 11-6 Recognize the need for disability income insurance. Disability income insurance provides regular cash income as the result of an accident, illness, or pregnancy. Sources of disability income insurance include the employer, Social Security, workers’ compensation, the Veterans administration, the federal and state governments, unions, and private insurance. 11-2 INTRODUCTORY ACTIVITIES • Point out the learning objectives (p. 367) in an effort to highlight the key points in the chapter. • Ask students to comment on the My Life Scenario for the chapter (p. 367). • Ask students to share experiences they have had with health care and medical insurance. • Discuss methods that can be used by employers and employees to reduce the costs of medical insurance. Invite a human resources director from a local company to describe the health insurance coverage offered to company employees. WHAT'S NEW TO THIS EDITION Revised Content: Health care debate Revised coverage: High medical costs Updated Exhibit 11-1: National health expenditures Updated coverage: Health insurance and financial planning New boxed feature: Financial Planning for Life's Situations Updated coverage: Types of health insurance coverage Updated coverage: Long term care insurance Cautions that even though the U.S. Supreme Court upheld the Affordable Care Act in 2012, the debate still continues. Provides revised and updated information on runaway health care costs. Highlights the U.S. national health expenditures from 1960 to 2018. Explains that although we spent over $3.1 trillion on health care in 2013, the number of Americans without basic health insurance has been growing. Describes the important provisions of COBRA's continuation coverage. Explains that a good health insurance plan should pay at least 80 percent for out-of-pocket expenses after a yearly deductible of $1,000 per person or $2,000 per family. Provides new statistics about the cost of long term care insurance. 11-3 Updated Did You Know feature New coverage: Private insurance companies New Exhibit 11-4: Summary of Benefits and Coverage New coverage: PPOs New coverage: The Health Insurance Marketplaces New Financial Planning for Life's Situation boxed feature New content: Medicare Expanded content: Medicare New Did You Know feature New Did You Know feature Shows the 2012 average costs of Long-term care in nursing homes and other such facilities. Describes that as of September 23, 2012, all health insurance companies and group health plans are required to provide a summary of health plan's benefits and coverage. Provides a Uniform Summary of Benefits and Coverage under the new Affordable Healthcare Act. Explains that starting in 2014, a new type of nonprofit, consumer-run health insurers will offer health insurance. Describes that starting in 2014, the Health Insurance Marketplaces will make buying healthcare coverage easier and more affordable. Provides a checklist of seven steps that you can take to get ready now for the Health Insurance Marketplaces. Describes that according to the CMS, since 2010 Medicare Advantage premiums have decreased by 10 percent and enrollment has increased by 28 percent. Explains that while Medicare enjoys broad support among seniors and general public, it faces a number of policy challenges including its affordability. Describes that Medicare enrollment has increased from 19 million in 1966 to over 50 million in 2013. Provides information about downloading a computer file of your claims data and add your personal health information to share with your health care providers and family. 11-4 New content: Medigap New coverage: Health Insurance and the Patient Protection and Affordable Care Act (ACA) New coverage: Pros and cons of the ACA New content: The Food and Drug Administration New Dashboard feature Provides sources on how to get more information about Medigap policies. Describes the major provisions of the ACA that take effect by January 2014. Is a government-run health care system that provides universal health care to all the most ethical? Explains the pros and cons of the Affordable Care Act. Provides information about the new websites maintained by the FDA and Medicare. Explains the importance of disability insurance in your financial plan. CHAPTER 11 OUTLINE I. Health Care Costs A. High Medical Costs 1. Rapid Increase in Medical Expenditures 2. High Administrative Costs B. Why Does Health Care Cost So Much? C. What Is Being Done About the High Costs of Health Care? D. What Can You Do to Reduce Health Care Costs? II. Health Insurance and Financial Planning A. What Is Health Insurance? B. Group Health Insurance C. Individual Health Insurance 11-5 D. Supplementing Your Group Insurance E. Medical Coverage and Divorce III. Types of Health Insurance Coverage A. Hospital Expense Insurance B. Surgical Expense Insurance C. Physician Expense Insurance D. Major Medical Expense Insurance E. Comprehensive Major Medical Insurance F. Hospital Indemnity Policies G. Dental Expense Insurance H. Vision Care Insurance I. Other Insurance Policies J. Long Term Care Insurance K. Major Provisions in a Health Insurance Policy 1. Eligibility 2. Assigned Benefits 3. Internal Limits 4. Copayment 5. Service Benefits 6. Benefit Limits 7. Exclusions and Limitations 8. Coordination of Benefits 9. Guaranteed Renewable 10. Cancellation and Termination L. Which Coverage Should You Choose? M. Health Insurance Trade-Offs 1. Reimbursement versus Indemnity 2. Internal Limits versus Aggregate Limits 3. Deductibles and Coinsurance 4. Out-of-Pocket Limits 5. Benefits Based on Reasonable and Customary Charges N. Health Information Online IV. Private Sources of Health Insurance and Health Care A. Private Insurance Companies B. Hospital and Medical Service Plans C. Health Maintenance Organizations (HMOs) D. Preferred Provider Organizations (PPOs) E. Home Health care Agencies F. The Health Insurance Marketplaces 11-6 G. Employer Self-Funded Health Plans H. New Health Care Accounts V. Government Health Care Programs A. Medicare B. What is Not Covered by Medicare C. Medigap D. Medicaid E. Health Insurance and the Patient Protection and Affordable Care Act of 2010 F. Fight Against Medicare/Medicaid Fraud and Abuse G. Government Consumer Health Information Websites 1. Healthfinder 2. Medlineplus 3. NIH Health Information Page 4. FDA: The Food and Drug Administration (FDA) VI. Disability Income Insurance A. Definition of Disability B. Disability Insurance Trade-Offs 1. Waiting or Elimination Period 2. Duration of Benefits 3. Amount of Benefits 4. Accident and Sickness Coverage 5. Guaranteed Renewability C. Sources of Disability Income 1. Employer 2. Social Security 3. Workers’ Compensation D. Determining Your Disability Income Insurance Requirement 11-7 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions • Health insurance is one way in which people protect themselves against economic losses due to illness, accident, or disability. I. HEALTH CARE COSTS (p. 368) • The soaring costs of medical care have forced employers to retain the services of cost containment or utilization firms. High Medical Costs (p. 368) • Rapid increase in medical expenditures • High administrative costs • Americans without insurance coverage Why Does Health Care Cost So Much? (p. 370) • The high and rising costs of health care are attributable to many factors. Because third parties— private health insurers and government—pay so much of the nation’s health care bill, hospitals, doctors, and patients too often lack the incentive to make the most economical use of health care services. What Is Being Done About the High Costs of Health Care? (p. 371) • Concerned groups such as employers, labor unions, health insurers, health care professionals, and consumers have undertaken a wide range of innovative activities to contain the costs of health care. What Can You Do to Reduce Health Care Costs? (p. 371) • The best way to avoid the high cost of sickness is to stay well. Learn to minimize, through intelligent self- care, the need for medical attention. • Transparency Master 11-1 shows how to reduce health care costs. • Use PPT slides 11-3 through 11-8 • Discussion Question: What factors have influenced the cost of health care and medical services in our society? • Use PPT slide 11-5 and 11-6. • Use PPT slide 11-7. • Text Highlight: Discuss the effect of employer spending for medical benefits on personal financial planning and growth of the economy. • Exercise: Create a list of actions that can be taken by the following groups to keep health care costs down: individuals; health care providers; insurance companies; employers; and government agencies. • Assignment: Research through library resources and discuss with company officials, methods that are being used to minimize medical costs. • Current Example: Health Insurance Forum: Visit www.insure.com/articles/healthi nsurance/. • Practice Quiz 11-1 (p. 373) II. HEALTH INSURANCE AND FINANCIAL PLANNING (p. 373) • The number of Americans without basic health insurance has been growing. What Is Health Insurance? (p. 373) • Health insurance is a form of protection whose primary purpose is to alleviate the financial burdens suffered by individuals because of illness or injury. • Use PPT slides 11-9 through 11-11. • Exercise: Ask students about special types of health insurance coverage they or their family members have. • Discussion Question: What is the relationship between health insurance coverage and other aspects of financial planning? 11-8 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions • Health insurance includes both medical expense insurance and disability income insurance. Group Health Insurance (p. 374) • Group plans comprise more than 85 percent of all the health insurance issued by life insurance companies. • The protection provided by group insurance varies from plan to plan. Individual Health Insurance (p. 374) • Individual health insurance covers either one person or a family. Coverage and cost vary from company to company. Supplementing Your Group Insurance (p. 374) • A sign that your group coverage needs supplementing would be its failure to provide benefits for the major portion of your medical care bills, mainly hospital, doctor, and surgical charges. • In supplementing your group health insurance, consider the health insurance benefits that your employer-sponsored plan provides to your spouse. • Most group policy contracts have a coordination of benefits (COB) provision. Medical Coverage and Divorce (p. 375) • Coverage under a former spouse’s medical plan can be continued for 36 months. • Premiums can run as high as $4,000 annually. • The COBRA of 1986 requires many employers to offer employees group health insurance. • Assignment: Talk to others about the impact of their health insurance on other financial decisions. Also, obtain information on the types of health insurance coverage they have. • Assignment: Have students contact an insurance agent to obtain cost information for an individual health insurance policy. • Supplementary Resource: Talk to someone in a personnel office of a business to obtain information on the health insurance provided as an employee benefit. • Discussion Question: Should employers be required to provide employees some type of health insurance coverage, even if it is a group plan, with each employee paying his or her full premium? • Practice Quiz 11-2 (p. 375) III. TYPES OF HEALTH INSURANCE COVERAGE (p. 376) • Several types of health insurance coverage are available under group and individual policies. Hospital Expense Insurance (p. 376) • Hospital expense insurance pays part or all of hospital bills for room, board, and other charges. Surgical Expense Insurance (p. 376) • Surgical expense insurance pays part or all of the surgeon’s fees for an operation. • Use PPT slides 11-12 through 11-17 • Transparency Master 11-2 provides students with an overview of the various types of health insurance coverage. • Assignment: Have students talk to several people to determine the type of medical insurance used most frequently. • Exercise: Have students create situations in which certain types of health insurance coverage would be used. 11-9 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions Physician Expense Insurance (p. 376) • Physician expense insurance helps pay for physician’s care that does not involve surgery. Major Medical Expense Insurance (p. 376) • Major medical expense insurance protects against the large expenses of a serious injury or a long illness. Comprehensive Major Medical Insurance (p. 377) • Comprehensive major medical insurance is a type of major medical insurance that has a very low deductible amount and is offered without any separate basic plan. Hospital Indemnity Policies (p. 378) • A hospital indemnity policy pays benefits only when you are hospitalized, but these benefits are paid to you in cash. Dental Expense Insurance (p. 378) • Dental expense insurance provides reimbursement for the expenses of dental services and supplies. Vision Care Insurance (p. 378) A recent development in health care coverage has been vision care insurance. • Discussion Question: Which is more important to an individual or family: basic health insurance coverage for everyday expenses and most types of surgery or major medical insurance? • Exercise: Have students create a list of specialized insurance coverage available to individuals or through employee benefit programs. • Text Highlight: Point out the major features and weaknesses of hospital indemnity policies. (p. 378) • Current Example: Income and age tied to lack of dental benefits, poor oral health. Poor children suffer twice as many cavities as more affluent kids, and a quarter of them don’t get to the dentist before age 5. Visit this Website: http://www.insure.com/articles/h ealthinsurance/dental- health.html. • Text Highlight: Point out the major provisions in a health insurance policy on page 379. Other Insurance Policies (p. 378) • Dread disease and cancer policies, which are usually solicited through the mail, in newspapers and magazines, or by door-to-door salespeople working on commission are notoriously poor values. Long-Term Care Insurance (p. 378) • Long-term care is day-in, day-out help that you could need if you ever have an illness or disability that lasts a long time and leaves you unable to care for yourself. Major Provisions in a Health Insurance Policy (p. 379) • All health insurance policies have certain provisions in common. They are: Eligibility • Assignment: Have students collect and analyze ads for various types of mail order health insurance plans. • Use PPT slides 11-14 • Assignment: Have students prepare a list of provisions in a health insurance that are important to them. 11-10 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions Assigned benefits Inside limits Service benefits Benefit limits Exclusions and limitations Coordination of benefits Guaranteed renewable Cancellation and termination Which Coverage Should You Choose? (p. 380) • Ideally, you should get a basic plan and a major medical supplementary plan. Or you should get a comprehensive major medical policy that combines the values of both these plans in a single policy. • Text Reference: Use Sheet #51 for assessing current and needed health care insurance. Health Insurance Trade-Offs (p. 380) • The benefits of health insurance policies differ, so consider the following: Reimbursement versus indemnity Inside limits versus aggregate limits Deductibles and coinsurance Out-of-pocket limit Benefits based on reasonable and customer charges Health Information Online (p. 381) • The best medical Websites. • Practice Quiz 11-3 (p. 381) IV. PRIVATE SOURCES OF HEALTH INSURANCE AND HEALTH CARE (p. 381) • Health insurance is available from private insurance companies, from service plans, from HMOs, from PPOs, from government programs, and from fraternal organizations and trade unions. Private Insurance Companies (p. 382) • Most private insurance companies sell health insurance policies to employers, which in turn offer the benefits to employees and their dependents, as fringe benefits. Hospital and Medical Service Plans (p. 382) • Blue Cross and Blue Shield are statewide organizations similar to commercial health insurance companies. • Use PPT slide 11-18 through 11-21. • Text Highlight: Point out the features of Blue Cross and Blue Shield plans on page 382. • Discussion Question: Do HMOs contribute to the reduction of medical costs? • Current Example: ‘Medical Travel is Going to be Part of the Solution’; David Boucher of Blue Cross & Blue Shield of South Carolina is forging alliances that allow members to go abroad for surgery and other procedures, (Asia Health) (Blue Cross and Blue Shield Association) Bruce Einhorn, Business Week Online March 18, 2008 pNA. 11-11 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions Blue Cross plans provide hospital care benefits on essentially a “service type” basis. Blue Shield plans provide benefits for surgical and medical services performed by physicians. Managed care refers to prepaid health plans that provide comprehensive health care to members. Health Maintenance Organizations (HMOs) (p. 382) • A health maintenance organization (HMO) is a health insurance plan that directly employs or contracts with selected physicians, surgeons, dentists, and optometrists to provide you with health care services in exchange for a fixed, prepaid monthly premium. Preferred Provider Organizations (p. 384) • Preferred provider organizations (PPOs) combine the best elements of the fee-for-service and HMO systems. PPOs provide the services of doctors and hospitals at discount rates or give breaks in copayments and deductibles. • Exclusive provider organizations (EPOs) are reimbursed on a fee-for-service basis according to a negotiated discount or fee schedule. • Point of service plans (POSs) sometimes called HMO-PPO hybrid or open-ended HMOs, combine characteristics of both HMOs and PPOs. • The evolution of health care plans will continue. • Use PPT slide 11-19. • Exercise: Develop a list of advantages and disadvantages of HMO membership. • Assignment: Compare the services offered by HMOs in your community. Survey HMO members to obtain information on the positive and negative aspects of membership. • Text Highlight: Use the “Financial Planning for Life’s Situations” feature (Checklist for You and Your Family) on p. 387. Home Health Care Agencies (p. 386) • Home health care providers furnish and are responsible for the supervision and management of preventive medical care in a home setting in accordance with a medical order. The Health Insurance Marketplaces (p. 386) Employer Self-Funded Health Plans (p. 386) • Certain types of health insurance coverage are made available by plans that employers, labor unions, fraternal societies, or communities administer. Usually, these groups provide the amount of protection that a specific group of people desires and can afford. • Discussion Question: How do health associations and home health agencies differ from HMOs? • Supplementary Resource: Request a copy of Alternatives to Hospitalization from Aetna Life and Casualty Co., Corporate Communications, 151 Farmington Ave., Hartford, CT 06156. • Use PPT slide 11-21. New Health Care Accounts (p. 386) 11-12 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions • Health Savings Accounts (HSAs), which Congress authorized in 2003, are the newest addition to health insurance available to Americans. . V. GOVERNMENT HEALTH CARE PROGRAMS (p. 388) • Two sources of government health insurance are Medicare and Medicaid. Medicare (p. 388) • Medicare is a federal health insurance program for people 65 or older, people of any age with permanent kidney failure, and certain disabled people. • Medicare has four parts: Hospital insurance benefits (Part A) helps pay for inpatient hospital care, inpatient care in a skilled nursing facility, home health care, and hospice care. Medical insurance benefits (Part B) helps pay for doctor’s services and for a variety of other medical services and supplies that are not covered by hospital insurance. The Balanced Budget Act of 1997 created the new Medicare + Choice program. The Medicare Prescription, Drug Improvement and Modernization Act of 2003 renamed the Medicare + Choice program as Medicare Advantage (Part C). This new plan may be less expensive than the original Medicare. The new law also provides Medicare beneficiaries with prescription drug discounts (Part D) beginning January 1, 2006. Mending Medicare. Without changes, the nation’s multi-billion-dollar-a-year system for providing health care to seniors is projected to go broke in 2008. What is not covered by Medicare? Medicare does not cover some medical expenses at all. What is not Covered by Medicare? (p. 389) Medigap (p. 390) • Medigap insurance, intended to supplement Medicare, is not sold or serviced by the federal government or state governments. Many private • Practice Quiz 11-4 (p. 387). • Use PPT slide 11-22 and 11-23. • Discussion Question: Should the coverage provided by Medicare be expanded? • Assignment: Talk to several people covered by Medicare and Medicaid to obtain information on the coverage provided and the difficulties sometimes faced. • Exercise: Create a list of situations that would be methods that can be used to cover some of the items not covered by Medicare. • Text Highlight: Point out the “Financial Planning for Life’s Situations” feature that provides some consumer tips on health and disability insurance. (p. 395) • Supplementary Resources: A Brief Explanation of Medicare, Social Security Administration, 6401 Security Blvd., Baltimore, MD 21235, and How to Cover the Gaps in Medicare, American Institute for Economic Research, Division Street, Great Barrington, MA 01230. 11-13 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions insurance companies sell medigap insurance. • Do you need medigap insurance? If you are a Medicare beneficiary enrolled in a prepayment plan, such as an HMO, you may not need a Medicare supplement policy. Low-income people who are eligible for Medicaid generally do not need medigap insurance. Medicaid (p. 392) • Title XIX of the Social Security Act provides for a program of medical assistance to certain low-income individuals and families. • Medicaid is administered by each state within certain broad federal requirements and guidelines. • Many members of the Medicaid population are also covered by Medicare. Health Insurance and the Patient Protection and Affordable Care Act of 2010 (p. 392) Fight Against Medicare/Medicaid Fraud and Abuse (p. 394) • About 70 percent of consumers believe the Medicare program would not go broke if fraud and abuse were eliminated. • In 1997, President Clinton introduced the Medicare/Medicaid Anti-Waste, Fraud and Abuse Act, which established tough new requirements for health care providers. Government Consumer Health Information Websites (p. 394) • Major Health and Human Services health information Websites include: • Healthfinder links to more than 1,250 Websites. • Medline PLUS is coordinated by the National Library of Medicine. • NIH Health Information page provides a single access point to the consumer information resources of the National Institutes of Health. • Use PPT Slide 11-24. • Practice Quiz 11-5: (p. 395). 11-14 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions VI. DISABILITY INCOME INSURANCE (p. 396) • Disability income insurance benefits provide regular cash income lost by employees as the result of an accident, illness, or pregnancy. • Generally disability income policies are divided into short-term and long-term policies. Definition of Disability (p. 396) • There are different definitions of disability. Some policies define it as simply being unable to do your regular work, while others are stricter. Disability Insurance Trade Offs (p. 396) • There are important trade-offs to consider in buying disability income insurance. • Waiting or elimination period • Duration of benefits • Amount of benefits • Accident and sickness coverage • Guaranteed renewability • Use PPT slides 11-25 through 11-27. • Discussion Question: Why is disability income insurance a frequently overlooked component of financial planning? • Text Highlight: Point out the basic purpose and provisions of disability income insurance. (p. 396) • Assignment: Survey several people to determine if they have disability income insurance. Also, compare costs of this type of coverage with several different insurance companies. Sources of Disability Income (p. 397) • There are three major sources of disability income. • Employer • Social Security • Workers’ compensation • The availability and extent of these and other disability income sources vary widely in different parts of the country. Determining Your Disability Income Insurance Requirement (p. 398) • If the sum of your disability benefits approaches your after-tax income, you don’t need disability income insurance. • If Social Security and other disability benefits are not sufficient to support your family, you may want to consider buying disability income insurance to make up the difference. • Use PPT slide 11-27. • Practice Quiz 11-6 (p. 399) 11-15 CONCLUDING ACTIVITIES • Discuss My Life Stages For Health, Disability and Long-Term Care Insurance (p. 400) • Point out the chapter summary of objectives (p. 401) and key terms in the text margin. (p. 401) • Discuss selected end-of-chapter Financial Planning Problems, Financial Planning Activities, and Financial Planning Case., • Have students do one or more of the end-of-chapter activities (p. 403) • Use the Chapter Quiz in the Instructor’s Manual. WORKSHEETS FROM PERSONAL FINANCIAL PLANNER FOR USE WITH CHAPTER 11 Use the "Your Personal Financial Planner in Action" activities to encourage students to plan and implement various personal financial decisions. Sheet 51 Assessing Current and Needed Health Care Insurance Sheet 52 Disability Income Insurance Needs CHAPTER 11 QUIZ ANSWERS True-False Multiple Choice 1. T (p. 368) 6. D (p. 369) 2. T (p. 376) 7. B (p. 376) 3. F (p. 378) 8. A (p. 378) 4. T (p. 382) 9. C (p. 392) 5. F (p. 396) 10. A (p. 388) 11-16 Name ________________________________________ Date____________________________ CHAPTER 11 QUIZ TRUE-FALSE 1. Affordable health care has become one of the most important social issues of our time. 2. Hospital expense insurance pays part or all of hospital bills for room, board, and other charges. 3. Dread disease and cancer insurance policies are usually good values for most individuals. 4. Blue Cross and Blue Shield are statewide organizations similar to commercial health insurance companies. 5. Disability income insurance benefits provide for the full replacement of income lost by employees as the result of an accident, illness, or pregnancy. MULTIPLE CHOICE _____6. In 2013, health care costs were estimated at a. $900 million b. $0.5 trillion c. $1.0 trillion d. over $3.1 trillion _____7. Which type of health insurance pays part or all of the surgeon’s fee for an operation? a. Hospital expense b. Surgical expense c. Physician’s expense d. Major medical expense _____8. What form of insurance is growing faster than any other form of insurance in the country? a. Long-term care b. Vision care c. Dread disease d. Dental expense _____9. Which health insurance plan is administered by each state within certain broad federal requirements and guidelines? a. Medicare b. Blue Cross c. Medicaid d. Blue Cross _____10. Which health program is administered by the Centers for Medicare and Medicaid Services? a. Medicare b. Blue Cross c. Medicaid d. Blue Cross 11-17 SUPPLEMENTARY LECTURE: 11-1 Supplementary Lecture 11–1 BusinessWeek Business Week, March 24, 2008 i4076 p36 OUTSOURCING THE PATIENTS; More U.S. health insurers are slashing costs by sending policyholders overseas for pricey procedures. Bruce Einhorn; Catherine Arnst. Full Text: COPYRIGHT 2008 The McGraw-Hill Companies, Inc. Byline: Bruce Einhorn, with Catherine Arnst For years, Americans have been traveling abroad to save money on elective procedures or dental work. David Boucher, 49, doesn’t fit the usual profile for such medical tourists. An assistant vice-president of health-care services at Blue Cross & Blue Shield of South Carolina, he has ample health benefits. But Boucher recently chose to have a colonoscopy at Bumrungrad International Hospital in Bangkok, mainly to make a point about the expanding options available to Blue Cross customers. And his company happily picked up the $640 tab--a bargain by U.S. standards. Blue Cross and other insurers would like to see more policyholders traveling abroad for medical care. Since the start of the year, Boucher has signed alliances with seven overseas hospitals and hopes to add five more by yearend, including them all in coverage for his company’s 1.5 million members. As health-care costs continue to rise in the U.S., “medical travel is going to be part of the solution,” he says. Yes, just like manufacturing facilities and call centers, health care is moving offshore. “All of the largest U.S. insurers are starting to educate themselves or are putting [offshore] programs in place,” says Jonathan Edelheit, president of the Medical Tourism Assn., an industry group formed just last year. Companies that self-insure are also bombarding Edelheit’s group with requests for information. Getting covered employees to leave the U.S. won’t be that hard, says Edelheit. An insurance company could waive all deductibles and co-pays, offer to cover travel costs for the patient and family members, even throw in a cash incentive, and still save tens of thousands of dollars. After all, a heart procedure that costs $100,000 in the U.S. runs only $10,000 to $20,000 at some of the best private hospitals in Asia. And the quality of care? Foreign hospitals in such arrangements are typically approved by Joint Commission International, part of the same nonprofit organization that accredits American hospitals. 11-18 Blue Cross took the lead in medical offshoring when it formed its first partnership, with Bumrungrad Hospital, in February. Since then the insurer has signed similar pacts with the Parkway Group Healthcare, owner of three hospitals in Singapore, and hospitals in Turkey, Ireland, and Costa Rica. Three members of India’s Apollo Hospitals Group are also joining the network. And another large Indian chain, Wockhardt Hospitals, is talking with U.S. insurers as well. “Americans haven’t come to grips with having their heart surgery in Thailand,” says Curtis Schroeder, the American CEO of Bumrungrad. “But that will change.” The shift is sure to leave some policyholders disgruntled, of course. Offering international coverage might make it easier for employers to limit benefits at home, for instance, by raising the deductibles on U.S.- based procedures. It’s also extremely difficult for patients to sue for malpractice in most Asian countries. Bumrungrad has offices for marketing and promotion in 20 countries, but not the U.S.--in part because having a U.S. office would open the door to potential liability, hospital officials say. So it will take a while for the trickle of insured U.S. patients in Asia to become a torrent. But over time, for policyholders and payers alike, the price may be hard to resist. COSTS OF A HEART BYPASS OPERATION Why insurers are partnering with hospitals overseas U.S.: $130,000 Singapore: 18,500 Thailand: 11,000 India: 10,000 Data: Thai Public Health Ministry 11-19 SUPPLEMENTARY ACTIVITY Health Insurance Crossword Puzzle Across 1. Health insurance to finance the cost of major illness and injury 4. An insurance company representative, licensed by the state 5. The amount of charges that must be absorbed by the protected person before benefits are paid by the company 7. _______ renewable contract—one which the insured has the right to continue 9. Any chance of loss 12. _______ period, time between the period of disability and the beginning of disability income insurance benefits 13. Termination of the policy because consumer has failed to pay premium with time required 14. A demand for payment of benefits 16. Benefits paid in a predetermined amount in the event of a covered loss 19. _______ period, a specific period after a premium payment is due in which consumer may make payment 20. Conditions that increase the likelihood of loss occurring 21. Specific conditions for which policy will not pay 22. Comprehensive health care group (abbr.) Down 1. A government health insurance premium for those 65 and older 2. _______ term disability—offered for prolonged illness 3. Amount payable by insurance company for coverage 6. Physical or mental handicap resulting from injury or illness 8. Period from date of employment to date insurance is in force 10. Agreement attached to policy which exempts coverage for certain conditions normally covered 11. _______ benefits which include hospital, surgical, and doctor’s visits 15. See 13 across (non payment of premium) 17. _______ benefits paid if someone dies 18. A policy is renewable each _______. 1 2 3 5 6 4 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 11-20 Quality Health Care Depends On 1. Access to adequate health care and appropriate business and individual resources. 2. Preservation of the health care system with modifications to contain costs and improve delivery of care. 3. Availability of comprehensive health insurance and prepayment plans. 4. Use of the private sector with governmental programs meeting needs which cannot otherwise be met. 5. Emphasis on the individual’s responsibility for wellness, supported by a variety of educational programs. 6. Planning of health services and facilities to avoid duplication. 7. Encouragement of innovative programs for care. Answer to the Health Insurance Crossword Puzzle M A J O R M E D I C A L B E O A G E N T D E D U C T I B L E N N I I G U A R A N T E E D C S F A A W R I S K R B W A B T E L I M I N A T I O N L A P S E S L I T S C L A I M V I N D E M N I T Y A T E N E C E P Y R G R A C E H A Z A R D S T R E X C L U S I O N H M O 3 21 4 65 7 9 8 13 11 10 12 14 15 16 17 18 19 20 21 22 11-21 ANSWERS TO PRACTICE QUIZZES, FINANCIAL PLANNING PROBLEMS, FINANCIAL PLANNING ACTIVITIES, FINANCIAL PLANNING CASE, AND CONTINUING CASE PRACTICE QUIZZES Practice Quiz 11-1 (p. 373) 1. What are the reasons for rising health care expenditures? The high and rising costs of health care are attributable to many factors. These factors are described on page 370 of the textbook. 2. What is being done by various groups to curb the high costs of health care? In the private sector, concerned groups such as employers, labor unions, health insurers, health care professionals, and consumers have undertaken a wide variety of innovative activities to contain the costs of health care. These activities are explained on page 371 of the text. 3. What can you do to reduce health care costs? The best way to avoid the high cost of sickness is to stay well. The prescription to stay well is on page 371 of the text. Practice Quiz 11-2 (p. 375) 1. What is health insurance and what is its purpose? Health insurance is a form of protection with a primary purpose to alleviate the financial burdens suffered by individuals because of illness or injury. The purpose of health insurance is to reduce the financial burden due to illness or injury. (p. 373) 2. What are group health insurance plans and individual health insurance? Group health insurance plans are employer sponsored, and the employer often pays part or all of their cost. Group insurance will cover you and your immediate family. Individual health insurance covers either one person or a family. If the kind of health insurance you need is not available through a group, then you should obtain an individual policy. (p. 374) 3. What is a coordination of benefits provision? The coordination of benefits is a method of integrating the benefits payable under more than one health insurance plan so that the benefits received from all sources are limited to 100 percent of allowable medical expenses. (p. 380) Practice Quiz 11-3 (p. 381) 1. What are several types of health insurance coverage available under group and individual policies? Following are several types of health insurance coverage available under group and individual policies: hospital expense insurance, surgical expense insurance, physician expense insurance, major medical expense insurance, comprehensive major medical insurance, hospital indemnity policies, dental 11-22 expense insurance, vision care insurance, dread disease and cancer insurance policies, and long-term care insurance. (pp. 376-378) 2. What are the major provisions of a health insurance policy? Major provisions in a health insurance policy are eligibility, assigned benefits, internal limits, copayment, service benefits, benefit limits, exclusions and limitations, coordination of benefits, and cancellation and termination. (p. 379) 3. How do you decide which coverage to choose? You have three choices. You can buy basic, major medical, or both basic and major medical. If your budget is very limited, then it is a toss-up between choosing a basic plan or a major medical plan. (p. 380) 4. How can you analyze the costs and benefits of your health insurance policy? The benefits of health insurance policies differ, and the differences in benefits can have a significant impact on your premiums. Consider the following trade-offs: reimbursement versus indemnity, internal limits versus aggregate limits, deductibles and coinsurance, out-of-pocket limit, and benefits based on reasonable and customary charges. (p. 381) Practice Quiz 11-4 (p. 387) 1. What are the major sources of health insurance and health care? Health insurance is available from more than 800 private insurance companies. Moreover, service plans such as Blue Cross/Blue Shield, health maintenance organizations, preferred provider organizations, government programs such as Medicare, fraternal organizations, and trade unions provide health insurance. (p. 382) 2. What are Blue Cross and Blue Shield plans? What benefits are provided by each plan? Blue Cross and Blue Shield are statewide organizations similar to commercial health insurance companies. Each state has its own Blue Cross and Blue Shield. Blue Cross plans provide hospital care benefits on essentially a “service type” basis. Through a separate contract with each member hospital, Blue Cross reimburses the hospital for covered services provided to the insured. Blue Shield plans provide benefits for surgical and medical services performed by physicians. The typical Blue Shield plan provides benefits similar to those provided under the benefit provisions of hospital-surgical policies issued by insurance companies. (p. 382) 3. What are the differences among HMOs, PPOs, EPOs, and POSs? Prepaid managed care is designed to make the provision of health care services cost effective by controlling their use. Health maintenance organizations are an alternative to basic and major medical insurance plans. A health maintenance organization (HMO) is a health insurance plan that directly employs or contracts with selected physicians, surgeons, dentists, and optometrists to provide you with health care services in exchange for a fixed, prepaid monthly premium. HMOs operate on the premise that maintaining your health through preventive care will minimize future medical problems. (p. 382) Preferred provider organizations (PPOs) are a list of doctors and hospitals that agree to provide health care at rates approved by the insurer. In return, PPOs expect prompt payment and the opportunity to serve an increased volume of patients. The premium for PPOs is slightly higher than for HMOs. 11-23 Preferred provider organizations (PPOs) combine the best elements of the fee-for-service and HMO systems. PPOs offer the services of doctors and hospitals at discount rates or give breaks in copayments and deductibles. An insurance company or your employer contracts with a PPO to provide specified services at predetermined fees to PPO members The exclusive provider organization (EPO) is the extreme of the PPO. Services rendered by nonaffiliated providers are not reimbursed. Therefore, if you belong to an EPO, you must receive your care from affiliated providers or pay the entire cost yourself. Providers typically are reimbursed on a fee-for-service basis according to a negotiated discount or fee schedule. Point of service plans (POSs), sometimes called HMO-PPO hybrids or open-ended HMOs, combine characteristics of both HMOs and PPOs. POSs use a network of selected contracted, participating providers. Employees select a primary care physician, who controls referrals for medical specialists. If you receive care from a plan provider, you pay little or nothing, as in an HMO, and do not file claims. Medical care provided by out-of-plan providers will be reimbursed, but you must pay significantly higher copayments and deductibles. The distinction among HMOs, PPOs, EPOs, and POSs is becoming blurred. As cost-reduction pressures continue and as these alternative delivery systems try to increase their market share, each tries to make its system more attractive. 4. What are home health care agencies? Home health care providers furnish and are responsible for the supervision and management of preventive medical care in a home setting in accordance with a medical order. Rising hospital care costs, new medical technology, and the increasing number of the elderly and infirm have helped make home care one of the fastest-growing areas of the health care industry. (p. 386) 5. What are employer self-funded health plans? Certain types of health insurance coverage are made available by plans that employers, labor unions, fraternal societies, or communities administer. Usually these groups provide the amount of protection that a specific group of people desires and can afford. It is important to note that self-funded groups must assume the financial burden if medical bills are greater than the amount covered by premium income. While private insurance companies have the assets needed in such situations, self-funded plans often do not. The results can be disastrous. Practice Quiz 11-5 (p. 395) 1. What are the two sources of government health insurance? Two sources of government health insurance are Medicare and Medicaid. Medicare is a federal health insurance program for people 65 or older, people of any age with permanent kidney failure, and certain disabled people. The program is administered by the Health Care Financing Administration. Local Social Security Administration offices take applications for Medicare, assist beneficiaries in filing claims, and provide information about the program. (p. 388) Medicaid is administered by each state within certain broad federal requirements and guidelines. Financed by both state and federal funds, it is designed to provide medical assistance to groups or categories of persons who are eligible to receive payments under one of the cash assistance programs. (p. 392) 2. What benefits are provided through Part A and Part B of Medicare? 11-24 Medicare has two parts—hospital insurance (Part A) and medical insurance (Part B). Hospital insurance helps pay for inpatient hospital care and certain follow-up care. Medical insurance pays for doctor’s services and many other medical services and items. (p. 390) 3. What is medigap insurance? To fill the gap between Medicare payments and medical costs not covered by Medicare, many companies sell medigap insurance policies. Medigap insurance, intended to supplement Medicare, is not sold or serviced by the federal government or state governments. (p. 390) Practice Quiz 11-6 (p. 399) 1. What is disability income insurance? Disability income insurance benefits provide for the partial replacement of income lost by employees as the result of an accident, illness, or pregnancy. Every worker needs disability income insurance to make his or her ends meet in case of a disability. Most disability income policies provide for a waiting period before payment begins, such as a week, a month, two months, or three months. (p. 396) 2. What are the three sources of disability income? Three sources of disability income are employers, Social Security, and workers’ compensation. (p. 397). 3. How can you determine the amount of disability income insurance you need? If the sum of your disability benefits approaches your after-tax income, you can safely assume that should disability strike, you’ll be in good shape to pay your day-to-day bills while recuperating. (p. 398) FINANCIAL PLANNING PROBLEMS (p. 402) 1. Calculating the Effect of Inflation on Health Care Costs. As of 2008, per capita spending on health care in the United States was about $8,000. If this amount increased by 5 percent a year, what would be the amount of per capital spending for health care in 10 years? $8,000 1.629 (future value of a single amount, 5%, 10 years) = $13,032. 2. Calculating the Amount of Reimbursement from an Insurance Company. The Kelleher family has health insurance coverage that pays 80 percent of out-of-hospital expenses after a $500 deductible per person. If one family member has doctor and prescription medication expenses of $1,100, what amount would the insurance company pay? The family pays the $500 deductible and 20% of $600. The insurance company would pay .80 $600 = $480. 3. Comparing the Costs of a Regular Health Insurance Policy and an HMO. A health insurance policy pays 65 percent of physical therapy cost after a $200 deductible. In contrast, an HMO charges $15 per 11-25 visit for physical therapy. How much would a person save with the HMO if he or she had 10 physical therapy sessions costing $50 each? Cost with health insurance: $200 deductible (first 4 sessions) + 35 percent $300 (next 6 sessions) = $305 Cost with HMO: 10 sessions $15 = $150 Savings of $155 with HMO 4 Calculating the Cost of Health Care Coverage With and Without a Stop-Loss Policy. Sarah’s comprehensive major medical health insurance plan at work has a deductible of $750. The policy pays 85 percent of any amount above the deductible. While on a hiking trip, she contracted a rare bacterial disease. Her medical costs for treatment, including medicines, tests, and a six-day hospital stay, totaled $8,893. A friend told her that she would have paid less if she had a policy with a stop-loss feature that capped her out-of-pocket expenses at $3,000. Was her friend correct? Show your computations. Then determine which policy would have cost Sarah less and by how much. Current policy: $8,893 – $750 = $8,143 x .15 (percentage Sarah must pay) = $1,221.45 + $750 (deductible) Total Sarah paid = $1,971.45. Sarah’s friend was not right. With stop-loss: Sarah would have paid the first $3,000. She paid $1,028.55 less with her current policy ($3,000 – $1,971.45). 5. Calculating the Amount of Disability Benefits. Georgia Braxton, a widow, has take-home pay of $600 a week. Her disability insurance coverage replaces 70 percent of her earnings after a four-week waiting period. What amount would she receive in disability benefits if an illness kept Georgia off work for 16 weeks? $600 .70 = $420 a week for 12 weeks, or $5,040. 6. Calculating the Cost of In-Network Care with a PPO. Stephanie was injured in a car accident and was rushed to the emergency room. She received stitches for a facial wound and treatment for a broken finger. Under Stephanie’s PPO plan, emergency room care at a network hospital is 80 percent covered after the member has met a $300 annual deductible. Assume that Stephanie went to a hospital within her PPO network. Her total emergency room bill was $850. What amount did Stephanie have to pay? What amount did the PPO cover? $850 - $300 = $550 $550 x .20 = $110 Therefore Stephanie pays $300 (deductible) + $110 (20% of $550) = $410 What amount did the PPO cover? The insurance paid 80% of $550, that is $550 x .80 = $440 11-26 Problems 7, 8 and 9 are based on the following scenario: Ronald Roth started his new job as Controller with Aerosystems today. Carol, the employee benefits clerk, gave Ronald a packet that contains information on the company’s health insurance options. Aerosystems offers its employees the choice between a private insurance company plan (Blue Cross/Blue Shield), an HMO, and a PPO. Ronald needs to review the packet and make a decision on which health care program fits his needs. The following is an overview of that information. A) The monthly premium cost to Ronald for the Blue Cross/Blue Shield plan will be $42.32. For all doctor office visits, prescriptions, and major medical charges, Ronald will be responsible for 20 percent and the insurance company will cover 80 percent of covered charges. The annual deductible is $500. B) The HMO is provided to employees free of charge. The co-payment for doctors’ office visits and major medical charges is $10. Prescription co-payments are $5. The HMO pays 100 percent after Ronald’s co-payment. There is no annual deductible. C) The POS requires that the employee pay $24.44 per month to supplement the cost of the program with the company’s payment. If Ron uses health care providers within the plan, he pays the co-payments as described above for the HMO. He can also choose to use a health care provider out of the service and pay 20 percent of all charges after he pays a $500 deductible. The POS will pay for 80 percent of those covered visits. There is no annual deductible. Ronald decided to review his medical bills from the previous year to see what costs he had incurred and to help him evaluate his choices. He visited his general physician four times during the year at a cost of $125 for each visit. He also spent $65 and $89 on prescriptions during the year. Using these costs as an example, what would Ron pay for each of the plans described above? (For the purposes of the POS computation, assume that Ron visited a physician outside of the network plan. Assume he had his prescriptions filled at a network-approved pharmacy.) 7. Evaluating Health Insurance Options. What annual medical costs will Ronald pay using the sample medical expenses provided if he were to enroll in the Blue Cross/Blue Shield plan? $1,038.64 ($507.84 in annual premiums, $500.00 deductible which covered his 4 office visits and $30.80 for prescriptions) 8. Evaluating Health Insurance Options. What total costs will Ronald pay if he enrolls in the HMO plan? $50.00 (co-payments only) 9. Evaluating Health Insurance Options. If Ronald selects the POS plan, what would annual medical costs be? $803.28 ($293.28 in annual premiums, $500 deductible for out-of-plan office visits, and $10 for prescriptions) 10. Calculating Out-of-Pocket Costs. Ariana’s health insurance policy includes an $800 deductible and a coinsurance provision requiring her to pay 20 percent of all bills. Her total bill is $3,800. What is Ariana’s total cost? 11-27 Total bill is $3,800 Ariana pays the deductible of $800 Insurance pays 80% of the remaining $3,000 ($3,800 - $800) or $2,400. Therefore, Ariana’s total cost is $800 + $600 = $1,400 11. Comparing Health Care Plan Costs. Richard is 35, single, and in reasonably good health. He works for a construction company that offers three health insurance plans. The first has a lifetime benefit of $1 million for all covered expenses, an annual deductible of $500, and a 15 percent coinsurance provision up to the first $2,000 in covered charges. The second requires a monthly premium of $50 and sets a $500,000 lifetime limit on benefits, has no annual deductible, and requires a $15 co-payment per office visit. The third has an annual deductible of $250 and a 25 percent coinsurance provision up to the first $1,500 in covered charges, with a lifetime limit on benefits of $700,000. Which plan should Richard choose? The answers will vary, but students may argue that Richard should choose the third plan with the $250 deductible. It has no additional monthly premium, a reasonable lifetime limit, and a low deductible. 12. Calculating Health Care Costs over Time. In 2009, Mark spent $9,500 on his health care. If this amount increased by 6 percent per year, what would be the amount Mark will spend in 2019? (Hint: use the compounded sum future value table in Chapter 1). $9,500 × 1.791 (future value of a single amount, 6%, 10 years) = $17,015 FINANCIAL PLANNING ACTIVITIES (p. 403) 1. Identifying Financial Resources Needed to Pay for Health Care Services. List health care services that you and your family members have used during the past year. Assign an appropriate dollar cost to each of these services, and identify the financial resources (savings, health insurance, government sources, etc.) that were used to pay for the services. The purpose of this activity is to make students aware of the health services used by individuals and family members. Depending on the age of the user, these services may include treatment at a local hospital for an emergency, birth of a child, common cold, and a number of physical or mental ailments. Dollar costs will vary according to the services used. Most students may respond that their or their parents’ health insurance paid for the services. Others may have paid from their own savings. Government health care plans may have picked up the medical tab for others. 2. Using Current Information to Obtain Costs of Health Care. Choose a current issue of Consumer Reports, Money, Business Week, or Kiplinger’s Personal Finance Magazine and summarize an article that updates the costs of health care. How may you use this information to reduce your health care costs? 11-28 Students’ answers will vary, but you may want to use this activity to reinforce the problem of rising health care costs and what students can do to reduce their own health care costs. 3. Comparing Major Provisions in a Health Care Insurance Policy. Obtain sample health insurance policies from insurance agents or brokers, and analyze the policies for definitions, coverages, exclusions, limitations on coverage, and amounts of coverage. In what ways are the policies similar? In what ways are they different? Students will find that most insurance companies will have the same major clauses, but different coverages for different amounts of insurance. The premiums for the same coverage may vary widely. 4. Using the Internet to Obtain Information about Various Types of Health Insurance Coverages. Visit the following Department of Health and Human Services Websites to gather information about various types of health insurance coverage. Prepare a summary report on how this information may be useful to you. a. HEALTHFINDER (www.healthfinder.gov) b. MEDLINE (www.medline.gov) c. NIH HEALTH INFORMATION PAGE HEALTHFINDER—A gateway site to help consumers find health and human services information quickly. HEALTHFINDER includes links to more than 1,250 Websites, including more than 250 federal sites and 1,000 state, local, not-for-profit, university, and other consumer health resources. Topics are organized in a subject index. With more than 7 million hits in its first two months of operations, HEALTHFINDER is currently rated fifth among consumers’ favorite Websites on the “Web 100” list. MEDLINE—The world’s most extensive collection of published medical information, coordinated by the National Library of Medicine. Originally designed primarily for health professionals and researchers, MEDLINE is also valuable for students and for those seeking more specific information about health conditions, research, and treatment. Free access to MEDLINE was initiated June 1997. “PubMed,” a free-online service, provides direct Web links between MEDLINE abstracts and the publishers of full-text articles. NIH HEALTH INFORMATION PAGE—Provides a single access point to the consumer health information resources of the National Institutes of Health, including the NIH Health Information Index, NIH publications and clearinghouses, and the Combined Health Information Database. 5. Learning about Social Security Benefits. Visit the Social Security Administration’s Web page to determine your approximate monthly Social Security disability benefits should you become disable in the current year. Or call your Social Security office to request the latest edition of Social Security: Understanding the Benefits. Student responses will vary. FINANCIAL PLANNING CASE (p. 404) Making Sense of Medicare 1. What factors should Eugenio Costa consider in making the choice among various types of Medicare: Medicare, Medigap, or HMO health care insurance policies? 11-29 Which policy Eugenio should buy depends on his present health and whether he is willing to risk out- of-pocket payments. Policies that offer drug benefits may not be worth the money. What he might pay in extra premiums may be greater than the benefits he receives. 2. Visit the following Medicare resources for obtaining general information, guides on buying Medigap or HMO coverage, and price quotations with insurance company ratings on Medigap insurance carriers. Students’ answers will vary. CONTINUING CASE Health Insurance (p. 404) 1. In evaluating the various health insurance plans, what factors should the Lawrences look for in a good health insurance plan? The Lawrences should consider the following factors: reimbursement versus indemnity; internal limits versus aggregate limits; deductibles and coinsurance and out-of-pocket limit. 2. When considering disability income insurance, what are the trade-offs of purchasing this type of insurance and how does this affect the Lawrences. The Lawrences should consider the following trade-offs in deciding the purchase of disability income insurance: waiting period; duration of benefits; amount of benefits; accident and sickness coverage; and guaranteed renewability. The Lawrences should not expect to insure for their full salay. Most insurers limit benefits from all sources to no more than 70-80 percent of the take-home pay. 3. Explain how Shelby and Mark might use the following Personal Financial Planning sheets when figuring out their health insurance needs. a. Assessing Current and Needed Health Care Insurance b. Disability Income Insurance needs. Student answers will vary .Encourage students to give specific examples of the couple's current habits in personal health matters. Students will be able to compare the cost of health insurance programs provided by private insurers. DAILY SPENDING DIARY (p. 405) Analysis Questions 1. What spending actions might directly or indirectly affect your health and physical well-being? Student answers will vary. 2. What amounts (if any) are currently required from your spending for the cost of health and disability insurance? Student answers will vary. 11-30 TM 11-1 Reducing Health Care Costs • Programs to carefully review health care fees and charges and the use of health care services • The establishment of incentives to encourage preventive care and to provide more services out of hospitals where this is medically acceptable • Involvement in community health planning to help achieve a better balance between health needs and health care resources • The encouragement of prepaid group practices and other alternatives to fee-for-service arrangements • Community health education programs that motivate people to take better care of themselves 11-31 TM 11-2 Types of Health Insurance Coverage Basic Health Insurance • Hospital expense insurance • Surgical expense insurance • Physician's expense insurance Major Medical Expense Insurance Comprehensive Major Medical Insurance Other Types of Health Policies • Hospital indemnity policy • Dental expense insurance • Vision care insurance • Dread disease policies • Long-term care insurance 11-32 Name ______________________________________ Chapter 11: Health, Disability, and Long-Term Care Insurance 3. A provision under which the insured pays a flat dollar amount each time a covered medical service is received after the deductible has been met. 6. A method of integrating the benefits payable under more than one health insurance plan (abbreviation). 8. A group of doctors and hospitals that agree to provide health care at rates approved by the insurer (abbreviation). 10. Insurance that pays most of the costs exceeding those covered by the hospital, surgical, and physician expense policies. 12. A provision under which an insured pays a certain amount, after which the insurance company pays 100 percent of the remaining covered expenses. 15. A provision under which both the insured and the insurer share the covered losses. 17. An extreme form of the PPO. Services rendered by nonaffiliated providers are not reimbursed (abbreviation). 18. Pays stipulated daily, weekly, or monthly cash benefits during hospital confinement. 19. An independent, nonprofit membership corporation that provides protection against the cost of surgical and medical care. 20. Prepaid health plans that provide comprehensive health care to members. 21. An amount the insured must pay before benefits become payable by the insurance company. 1. Insurance that provides day-in, day-out care for long-term illness or disability (abbreviation). 2. Insurance that suppliments Medicare by filling the gap between Medicare payments and medical costs not covered by Medicare. (Also called "MedSup.") 3. A type of major medical insurance that has a very low deductible and is offered without a separate basic plan. 4. Insurance that pays part or all of hospital bills for room, board, and other charges. 5. Coverage that includes hospital expense insurance, surgical expense insurance, and physician expense insurance. 7. An independent, nonprofit membership corporation that provides protection against the cost of hospital care. 9. Insurance that provides benefits for doctors' fees for nonsurgical care, X rays, and lab tests. 11. Insurance that pays part or all of the surgeon's fees for an operation. 13. Insurance that provides payments to replace income when an insured person is unable to work. 14. A network of selected contracted, participating providers; also called an "HMO-PPO hybrid" or "open-ended HMO" (abbreviated). 16. A health insurance plan that directly employs or contracts with selected physicians, surgeons, dentists, and optometrists to provide a wide range of health care services for a fixed, prepaid monthly premium (abbreviation). Across Down C O M P R E H E N S I V E M A J O R M E D I C A L H O S P I T A L I N D E M N I T Y P O L I C Y B A S I C H E A L T H I N S U R A N C E M A J O R M E D I C A L E X P E N S E P H Y S I C I A N E X P E N S E D I S A B I L I T Y I N C O M E S U R G I C A L E X P E N S E H O S P I T A L E X P E N S E M A N A G E D C A R E C O I N S U R A N C E D E D U C T I B L E B L U E S H I E L D C O P A Y M E N T B L U E C R O S S S T O P L O S S M E D I G A P P P O P O S L T C H M O E P O C O B 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Instructor Manual for Personal Finance Jack R. Kapoor, Les R. Dlabay , Robert J. Hughes, Melissa M. Hart 9780077861643, 9781260013993
Download
Close
Close
