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FIN 200: Personal Finance
Topic 13-Health and Disability Insurance Lawrence Schrenk, Instructor
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Learning Objectives
1. Describe the features of health insurance. ▪
2. Explain how to buy health insurance effectively.
3. Describe the features of disability insurance.
4. Describe the features of long term care insurance.▪
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Issues
Medical Costs Rising Health Insurance Premiums Rising Greater Longevity More Sophisticated (and Expensive)
Procedures Political Issues
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Health Insurance Coverage
Medical Mental Health Prescription Plan Dental Vision
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Terminology
Indemnity versus Managed Care Co-Payment versus Co-Insurance Premium Deductible Out-of-Pocket Expenses In- versus Out-of-Network Referrals
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Mental Health, Prescription Plan
Mental Health May be in Medical Coverage varies by Plan
Prescription Plan May be in Medical Formulary Generic versus Name-Brand Levels of Co-Payments
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Dental, Vision
Dental Check Ups Predominately Covered Typical Levels of Payment
Higher–Fillings Some–Crowns None–Implants
Vision Check Ups Predominately Covered Partial Payment for Glasses, Contacts
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Delivery Styles
Government Medicare Medicaid
Indemnity Plans Managed Care
Health Maintained Organization (HMO) Preferred Provider Organization (PPO)
Individual versus Group
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Key Trade-Off
Costs versus Flexibility/Coverage
Cost Flexibility
Indemnity
↑ ↑PPO
HMO
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Selection Guidelines
High Coverage Limit Reasonable Out-of-Pocket Cap No Dollar Limits on Individual Expenses No Referral Requirement Global Coverage
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Dollar Limits and Referrals
Dollar Maximum Per Claim Per Lifetime Per Procedure/Expense
Referrals In-Network List Referrals/Pre-Authorization
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Other
HIPAA–Health Insurance Portability and Accountability Act of 1996 ‘Preexisting Conditions’ Continuous Enrollment
COBRA–Consolidated Omnibus Budget Reduction Act of 1985 18 Months
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Long Term Care and Disability Insurance
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Disability Insurance
Substitutes payments for income if disabled. Sources
Individual Employer Social Security Worker’s Compensation
Payments are typically percentage of current salary.
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Long Term Care Nursing Home, Assisted Living, At Home High Cost
Average Nursing Home Costs (2008) $70,000-$90,000/year Specialized: $20,000+ per month
Premiums $2,000-3,000+ Points to Consider
Coverage Daily or Monthly Benefit and Benefit Period Elimination or Waiting Period Inflation Protection
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Ethical Dilemma
Vera is an 85-year-old widow and retiree from a large corporation. Her former employer recently changed the health care coverage for retirees to an HMO. Vera is having difficulty with her knees and has requested a referral to an orthopedist. After ordering x-rays, her primary care physician informs her that her knees are not serious enough to warrant knee replacement and he gives her a prescription to alleviate the pain. Several weeks later Vera reads an article that doctors in her HMO are rewarded for keeping utilization costs down. a. Discuss the ethics of HMOs rewarding physicians for
keeping utilization costs down. b. Does Vera have any options?
