Chapter 11, Health and Disability Insurance.pptx

Learning Objectives

  • Cost Increases

    • Explain why health insurance and health care costs are rising.

  • Insurance Definitions

    • Define health and disability income insurance; explain their importance in financial planning.

  • Coverage Analysis

    • Analyze benefits and limitations of various health care coverage types.

  • Private Insurance Evaluation

    • Evaluate private sources of health insurance and health care.

  • Government Programs Appraisal

    • Appraise government health care program sources.

  • Disability Insurance Recognition

    • Recognize the importance of disability income insurance.

Health Care Costs

  • Health insurance protects against economic loss due to illness, accidents, or disabilities.

  • The Patient Protection and Affordable Care Act enacted March 30, 2010, continues to shape health care reforms.

High Medical Costs Analysis

  • 2021 Estimates: Health care costs at $4.2 trillion (18.2% of GDP); expected to reach $6.2 trillion by 2028.

  • Uninsured: Approximately 26.1 million people lack health insurance.

  • Rapid increase in costs: From $41.6 billion (1965) to over $4 trillion (2020).

  • Administrative Costs: Much higher than in other countries (11% vs. 1% in Canada).

Factors Contributing to High Costs

  • Sophisticated technologies and duplication of services.

  • Increased treatments and older population.

  • Cost shifting due to regulations and rising emergencies.

  • Limited competition and high healthcare professional wages.

  • Inflation and fraud in the health sector.

Tackling High Health Care Costs

  • Careful fee reviews and preventive care incentives.

  • Support for community health education.

  • Keeping costs manageable through group practices and out-of-hospital services.

Reducing Personal Health Care Costs

  • Use flexible spending accounts and high-deductible health plans.

  • Opt for generic drugs and online pharmacies.

  • Seek state assistance programs for uninsured children.

  • Investigate non-urgent procedures and review medical billing.

Healthy Practices to Minimize Costs

  1. Maintain a balanced diet and healthy weight.

  2. Avoid smoking and limit alcohol consumption.

  3. Ensure adequate rest and exercise.

  4. Drive safely and minimize home hazards.

  5. Adhere to preventive health screenings.

Importance of Health Insurance in Financial Planning

  • Health insurance mitigates financial burdens from illness or injury.

  • Includes medical expense and disability income insurance as part of overall financial protection.

Types of Health Insurance

  • Group Health Insurance: Comprises approximately 90% of all health insurance; typically employer-sponsored.

  • Individual Health Insurance: Customized policies according to individual needs.

  • Coverage continuation under former spouse’s plans for up to 36 months post-divorce via COBRA.

Essential Insurance Features

  • A good health insurance plan should cover:

    • Hospitalization and doctor bills.

    • Minimum lifetime coverage of $1 million per family member.

    • Reasonable out-of-pocket limits ($4,000 - $6,000).

Medical Coverage Types

  • Hospital Expense Insurance: Covers room and board charges.

  • Major Medical Insurance: Includes serious injury/long-term illness provisions.

  • Additional Coverages: Dental, vision, and major provisions details such as assigned benefits and copayments.

Understanding Cost-Sharing Mechanisms

  • Deductibles and Coinsurance: Example explaining deductible and cost-sharing calculations.

  • Limitations and exclusions that may apply under policies.

Choosing Coverage

  • Options for medical insurance include basic, major medical, or a combination of both.

  • Ideal coverage blends basic and major medical advantages.

Evaluating Private Insurance Sources

  • Types include individual policies or group policies from employers.

  • Managed care options like Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs).

Government Health Programs Overview

  • Medicare: For those 65+ and some disabled individuals; covers various healthcare services.

  • Medicaid: Assists low-income individuals and families.

What Medicare Doesn’t Cover

  • Certain services such as acupuncture and non-approved skilled nursing care are excluded from Medicare coverage.

Affordable Care Act Highlights

  • Introduces provisions for pre-existing conditions and subsidies for small businesses.

  • Enables continued coverage for dependents till age 26 on parental plans.

Long-Term Care Insurance Insights

  • Essential for planning as more individuals over 50 face the risk of needing long-term care.

  • Costs of care can be substantial ($105,000 per year in nursing homes).

Disability Income Insurance Importance

  • Protects earning ability; provides regular income when unable to work.

  • Considerations include duration and benefits type from various sources such as employer plans and Social Security.