Comprehensive Guide to U.S. Healthcare and Life Insurance Concepts

Defects in the U.S. Healthcare System

Rising expenditures, large uninsured population, significant waste and inefficiency, and harmful insurer practices (e.g., preexisting condition exclusions, benefit limits).

Affordable Care Act (ACA)

Legislation that expanded insurance availability, introduced subsidies, prohibited annual/lifetime limits, eliminated preexisting condition exclusions, and allowed coverage extension to age 26.

Essential Health Benefits

Minimum services (e.g., hospitalization, prescription drugs, preventive services) that must be covered by individual medical expense plans under the ACA.

ACA Metal-Tier Categories

Four tiers (bronze, silver, gold, platinum) of individual medical expense insurance that differ based on the percentage of costs the insurer covers.

Deductible

The amount the insured must pay out-of-pocket before the insurer begins to pay for covered services.

Coinsurance

A percentage of the medical bill that the insured must pay after the deductible is met (e.g., 20%).

Out-of-Pocket Maximum

The most an insured person will have to pay for covered services in a policy year; the insurer pays 100% of covered costs after this limit is reached.

Managed Care Plans

Medical expense plans, like PPOs, that emphasize cost control through networks of contracted healthcare providers.

Preferred Provider Organization (PPO)

The most common type of managed care plan, contracting with providers for discounted services; allows greater flexibility than HMOs.

Health Savings Account (HSA)

A tax-exempt account linked to a high-deductible health plan, allowing tax-free withdrawals for qualified medical expenses.

Long-Term Care (LTC) Insurance

Provides benefits for services like custodial and medical care due to chronic illness or disability in various settings.

Activities of Daily Living (ADLs)

Benefit triggers for LTC insurance, typically including the inability to perform a set number of basic personal tasks like bathing, dressing, or eating.

Disability Income Insurance

Provides periodic income replacement (e.g., 60-70% of earnings) when an individual is unable to work due to sickness or injury.

Elimination Period (Disability Insurance)

The time period between when a disability occurs and when benefit payments begin (similar to a deductible).

Guaranteed Renewable Policy

A policy where the insurer guarantees renewal, but can increase premiums for an entire class of policyholders.

Noncancellable Policy

A policy where the insurer cannot cancel the policy and cannot increase premiums.

Individual Mandate

An ACA provision (with penalties removed after 2018) requiring individuals to maintain a minimum level of health insurance coverage.

Premature Death

A death with outstanding financial obligations, causing loss of future earnings and potential financial hardship for dependents.

Financial Justification for Life Insurance

When the insured has earned income and dependents relying on that income.

Human Life Value Approach

A method to estimate life insurance needs by calculating the present value of the insured's future earnings minus taxes and expenses.

Needs Approach

A method to estimate life insurance needs by assessing specific financial requirements, such as estate clearance, dependency income, and special needs (e.g., education).

Sandwiched Families

Families who are caring for both their own children and their elderly parents, often requiring careful life insurance planning.

Term Insurance

Life insurance that provides temporary protection for a specified period; premiums increase with age and it does not build cash value.

Cash-Value Life Insurance

Life insurance that provides lifetime coverage and includes a savings component that accumulates cash values.

Ordinary Life Insurance

A type of whole life insurance featuring level premiums and accumulating cash value that the policyholder can borrow or surrender.

Limited-Payment Life Insurance

A type of whole life insurance where premiums are paid for a specified period (e.g., 20 years), but the coverage lasts for the insured's entire life.

Endowment Insurance

A rare type of life insurance that pays a benefit if the insured dies within a period, or if the insured survives to the end of the period.

Universal Life Insurance

A flexible-premium life insurance policy that separates the protection and savings components.

Variable Universal Life

A type of life insurance that allows the policyholder to invest the premiums, bearing the investment risk, with no guaranteed minimum cash value.

Indexed Universal Life

A type of universal life that credits interest based on the performance of a market index, often with a minimum interest rate guarantee.

Joint Life Insurance

A policy that insures multiple lives and typically pays the benefit upon the first death.

Second-to-Die Insurance

A policy that insures multiple lives and pays the death benefit upon the last death, often used in estate planning.

Group Life Insurance

Life insurance that covers multiple individuals under a single master contract, often provided by an employer.

Financial impact of premature death

Loss of future earnings, additional expenses (funeral, estate costs), and decline in the family's standard of living.

A disadvantage of term insurance

Becomes expensive with age and does not build savings.