Health

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Health Disability Insurance

• Dr. Josephine Turner

2
Objectives

• Explain why the costs of health insurance and
  health care have been increasing.
• Define health insurance and disability income
  insurance and explain their importance in
  financial planning.

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Objectives

• Recognize the need for disability income
  insurance.
• Analyze the benefits and limitations of the
  various types of health care coverage.
• Evaluate private sources of health insurance and
  health care.
• Appraise the sources of government health care
  programs.

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Health Care Costs

• The US has the highest per capita medical
  expenditures of any industrialized country in the
  world.
• 4,340 per person in 1999.
• This amount is twice as much as the average for
  the 24 industrialized countries.
• 6 of the GDP in 1965, BUT 13.5 of our GDP in
  1999.

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Why Does Health Care Cost So Much?

• 6 basic reasons
• Advances in medical technology and care, which
  prolong life.
• Demographics.
• High administrative cost (26 of health care
  dollar vs. 1 in Canada.)

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Why Does Health Care Cost So Much?

• Duplication of tests and technologies, increase
  in variety and frequency of treatments.
• Regulations that result in cost shifting rather
  than cost reduction.
• Fraud Insurance fraud cost each Florida Family
  an additional 1,500 each year.

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What is Being Done About the High Cost of Health
Care?

• Careful review of fees and charges.
• Establish incentives for
• Preventive care
• Services provided out of the hospital where
  medically acceptable
• Reporting Fraud

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What is Being Done About the High Cost of Health
Care?

• Involve community in balancing health care needs
  and resources
• Encouragement of prepaid group practices
• Community health education programs to get people
  to take better care of themselves.

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How Can You Reduce Your Personal Health Care
Costs?

• Stay well-focus on prevention.
• Visit the NCQA web site (www.ncqa.org) and see
  how your health plan is judged.
• Eat a balanced diet and keep your weight under
  control.

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How Can You Reduce Your Personal Health Care
Costs?

• Avoid smoking. Dont drink in excess.
• Get enough rest, relaxation, and exercise.
• Drive carefully and watch out for accident and
  fire hazards in the home.

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Health Insurance and Financial Planning

• 42 million Americans have no health insurance.
• Older college students are not covered by
  parents policy.

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Health Insurance and Financial Planning

• Health insurance alleviates the financial burdens
  people suffer due to illness or injury.

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Health Insurance and Financial Planning

• Part of your overall risk management plan
• Disability income insurance protects your most
  valuable asset your ability to earn an income.

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Health Insurance and Financial Planning continued

• Group plans comprise more than 85 of all health
  insurance issued.
• Most group plans are employer sponsored, and the
  employer pays part or most of the cost.

15
Health Insurance and Financial Planning

• The Health Insurance Portability and
  Accountability Act provides federal portability
  standards, nondiscrimination in health insurance,
  and guaranteed renew ability.
• If you change jobs you need not lose your health
  insurance.
• Individual insurance is also available.

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Health Insurance and Financial Planning

• You can supplement your group policy.
• A coordination of benefits provision in policies
  says that benefits received from all sources are
  limited to 100 of allowable medical expenses.

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COBRA

• COBRA requires many employers to offer employees
  and dependents the opportunity to continue their
  group coverage for a set period of time following
  a divorce, death, etc. However, the premiums
  can be as high 100 of cost plus 2 for
  administration.

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A Good Health Insurance Plan Should..

• Offer basic coverage for hospital and doctor
  bills.
• Cover at least 120 days hospital room and board.
• Provide at least 1,000,000 lifetime maximum per
  person.

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A Good Health Insurance Plan Should

• Pay at least 80 of out-of-hospital expenses
  after the yearly deductible is met.
• Impose no unreasonable exclusions.
• Limit your out-of-pocket expenses to no more than
  3,000 to 5,000 in a year, excluding dental,
  optical and prescription costs.

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Types of Health Care Coverages

• Hospital expense insurance.
• Hospital room and board and other charges.
• Surgical expense insurance.
• Surgeons fee for an operation.
• .

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Types of Health Care Coverages

• Physician expense insurance.
• Pays for physicians care that does not include
  surgery, such as office visits, lab tests and
  X-rays.
• Major medical expense insurance.
• Covers expenses for a serious injury or long term
  illness. Has a deductible and coinsurance.

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Types of Health Care Coverages

• Comprehensive major medical insurance.
• Low deductible offered without a separate, basic
  plan.
• Hospital indemnity.
• Pays a fixed amount for each day you are in the
  hospital. Best for people in high risk groups.
• Dread disease and cancer insurance policies.
• Focus on unrealistic fears, and only pay out for
  very specific conditions. Often sold by people
  working on commission.

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Types of Health Care Coverages

• Dental expense insurance.
• Group coverage for exams, cleaning, x-rays,
  filings, oral surgery.
• Vision care.
• Some group plans include exams and glasses.
• Long term care insurance.
• Virtually unknown 30 years ago, but now is
  growing faster than any other form of insurance.

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Why Do People Buy Long-Term Care Insurance?

• To avoid dependence 25
• To avoid losing assets 23
• To Protect standard of living 15
• Guarantee Services 12
• Other reasons 25

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Health Insurance Policy Provisions

• Eligibility.
• Varies with age, marital status and dependency.
• Assigned benefits.
• Insurance pays provider directly.
• Internal limits.
• Fixed amount/day for hospital room.
• Co-payment.
• Cost sharing in the form of a flat dollar amount
  you pay, such as 20.00 per office visit or
  prescription.

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Health Insurance Policy Provisions

• Service benefits.
• Benefits limits.
• Exclusions and limitations.
• Coordination of benefits.
• Guaranteed renewable.
• Cancellation and termination

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Trade-Offs in Choosing a Policy

• Reimbursement versus indemnity.
• Inside limits versus aggregate limits.
• Deductibles and coinsurance.
• Out-of-pocket limit, or stop-loss.
• Benefits based on reasonable and customary
  charges.
• Health information online can provide information.

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Private Sources of Health Insurance and Health
Care

• Private insurance companies.
• Individual policy.
• Group policy sold to an employer.
• Hospital and medical service plans.
• Blue Cross hospital care benefits.
• Blue Shield surgical and medical services
  benefits.
• Managed care.
• Prepaid health plan.
• Primary care physician.

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Private Sources of Health Insurance and Health
Care

• Health Maintenance Organizations.
• Contract with care providers.
• Fixed monthly premium.
• Focus on prevention and wellness.
• Preferred Provider Organizations.
• Several providers to choose from.
• Costs more than a HMO, but you have more choice
  and fewer restrictions.
• If you go to a non PPO provider it costs more.

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Disability Income Insurance

• No matter what your age, you are more likely to
  become disabled than to die.
• Young, healthy people dont think about risks
  related to all their future earning potential.
• Provides regular cash income lost by employees as
  the result of an accident, illness or pregnancy.
• If you become disabled your income drops but
  expenses go up.

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Disability Income Insurance and Financial Planning

• Carefully read a policys definition of
  disability.
• May only pay if you cant work at any job.
• Look for a policy that pays if you are unable to
  work at your regular job.
• Aim for a benefit that when added to your other
  income will equal 60-70 of your gross pay.

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Disability Income Insurance

• How long do benefits last? To age 65? For life?
• How long is the waiting period? 90 days? 180
  days?
• Look for a policy that is
• Noncancelable.
• Guaranteed renewable.

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Five Sources of Disability Income

• Savings your emergency fund
• Employer -
• Group disability policy may be short or long term
  but usually not enough by itself.
• Social Security -
• Covers total disability that lasts more than one
  year.
• Workmans Compensation-
• If you are injured at work.
• Disability Insurance -
• You get it to supplement other income sources to
  achieve 70-80 of your take home pay.

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Government Programs

• Medicare federal program for those age 65 and
  older, and certain disabled persons.
• Part A compulsory.
• Covers hospital costs including doctor.
• Part B voluntary.
• Doctors office visits prescriptions
• Medigap May pay what Medicare doesnt.
• Medicaid.
• Low income people of all ages.
• State administered with federal guidelines.

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Terms

• Co insurance
• Co payment
• Coordination of benefits
• Pre existing conditions
• Exclusions
• Waiting Period
• Social Security rider

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References

• Garman, E. Thomas and Raymond E. Forgue. Personal
  Finance 7th Ed. NY Houghton Mifflin Company
  2003.
• Kapoor, Jack R.,Les R. Dlabay, and Robert J.
  Hughes. Personal Finance 3rd Ed. Boston
  Irwin.1994.
• The Florida Department of Financial Services.
  Health Insurance A Guide for Consumers. 2003.
• The Coalition Against Insurance Fraud.