Exam 4

Chapters 15 & 16 - Health Insurance Overview

• Health Insurance Definition: Encompasses various plans and systems covering medical expenses for individuals and families.

• Healthcare Transaction Structure:

  • Traditional Consumer Transaction: A buyer pays a seller for goods.
  • Healthcare Transaction: Involves:
  • Provider: Doctors, hospitals, and medical suppliers.
  • Consumer: Patients or insured employees.
  • Third-party Insurers: Includes private insurers and government programs like Medicare/Medicaid.

• Key Roles:

  • Provider/Seller: Doctors, hospitals, drug companies, medical device manufacturers.
  • Consumer/Buyer: Patients, insured employees, government.

• Effects of Three-Party System:

  • Patient Insured Employee: Lower costs lead to over-utilization; less incentive to control spending.
  • Healthcare Providers: Operate on a fee-for-service structure, incentivizing increased service delivery.

• High Costs of Healthcare in the U.S.:

  • National Health Expenditures (2022):
  • Total: Approximately 4.5 trillion.
  • Accounted for 16.6\% of GDP.
  • Per capita costs: 12,555.
  • Comparison with Other Countries:
    • Switzerland: 8,049
    • Germany: 8,011
    • Netherlands: 6,729
    • Canada: 6,319

• Global and U.S. Contributions to High Costs:

  • Global Factors:
  • Technological advances (e.g., MRI, organ transplants).
  • Aging population.
  • Lifestyle diseases.
  • Third-party financing complicates cost control.
  • Specific U.S. Factors:
  • Prevalent employer-sponsored insurance.
  • High administrative costs.
  • Lack of transparency in costs and quality.
  • Cost-shifting in Medicaid and Medicare.
  • Defensive medicine practices leading to unnecessary tests and treatments.

• Major Defects in the U.S. Healthcare System:

  • Rising costs, large uninsured population, inefficiencies, unfavorable insurance practices.

• Affordable Care Act (ACA):

  • Key Components:
  • Guaranteed Issue: Insurers must cover pre-existing conditions.
  • Community Rating: Limited rating variables for premium calculations.
  • Minimum Health Standards: Coverage for dependents until age 26, no lifetime limits, essential health benefits.
  • Individual Mandate: Required purchase of health insurance (now repealed).
  • Health Insurance Exchanges: Platforms for purchasing insurance.
  • Subsidies: Financial assistance for low-income families.
  • Employer Mandate: Firms with 50+ employees must provide coverage or face fines.
  • Claim Payments: Insurers must pay at least 85\% of premiums in claims.

• Cost Sharing in Health Insurance:

  • Types of Cost Sharing:
  • Copayments: Fixed fees for services (e.g., 25 for a doctor visit).
  • Deductibles: Amount paid by insured before insurance starts covering (e.g., 1,000/year).
  • Coinsurance: Percentage of costs after deductible is met (e.g., 20\%).
  • Out-of-Pocket Maximum: Cap on what the insured pays in a year (e.g., 5,000).

• Specific Cost Sharing Scenario:

  • Jon Snow's Medical Bills:
  • For a 4,000 bill:
    1. Jon pays 1,000 deductible.
    2. Remaining: 4,000 - 1,000 = 3,000.
    3. 20% coinsurance on the remaining: 3,000 \times 0.2 = 600.
    4. Total owed: 1,000 + 600 = 1,600.
  • For a 30,000 surgery:
    1. Deductible paid: 1,000.
    2. Remaining: 30,000 - 1,000 = 29,000.
    3. Coinsurance: 29,000 \times 0.2 = 5,800.
    4. Total owed: 1,000 + 5,800 = 6,800.

• Types of Health Insurance:

  • Individual Medical Expense Insurance: Coverage for individuals lacking group insurance.
  • Group Medical Expense Insurance: Employer benefits covering various medical costs.

• Managed Care Plans:

  • Defined as systems providing covered services cost-effectively with limited provider choices.

• Types of Managed Care Plans:

  • Health Maintenance Organization (HMO):
  • Prepaid, limited provider choices, lower costs.
  • Disadvantages: Limited out-of-network coverage and referral requirements.
  • Preferred Provider Organization (PPO):
  • Contracted networks with discounted services; flexible choices for higher costs.
  • Advantages: No referrals needed; broader access.
  • Disadvantages: Higher costs, complicated billing.
  • Point of Service (POS):
  • Combines HMO and PPO; requires a primary care physician as a gatekeeper.

• Consumer Directed Health Plan (CDHP):

  • Combines high-deductible plans with Health Savings Accounts (HSAs).
  • HSAs: Tax-exempt accounts for medical costs; promotes cost sensitivity.
  • Advantages of CDHP: Lower premiums, retirement savings when unused funds remain.
  • Disadvantages of CDHP: High initial costs may deter low-income individuals.

• Flexible Spending Accounts (FSA):

  • Allow pre-tax payments for unreimbursed medical expenses; non-transferable.

• Choosing a Healthcare Plan:

  • Factors to consider:
  • Deductibles, Coinsurance, Out-of-Pocket Maximums, Copayments, Provider Networks, Premiums.
  • Plan Comparison Examples: Evaluate costs, deductibles, out-of-pocket limits, and network restrictions to find the best fit.

Chapter 19 - Basis of Legal Liability

• Legal Wrong: A violation of legal rights or duty failure.

  • Types include:
  • Crime
  • Breach of Contract
  • Tort

• Understanding Tort:

  • Legal wrong allowing for monetary damage claims.
  • Key Definitions:
  • Plaintiff: Injured party.
  • Tortfeasor: Alleged wrongdoer.
  • Categories of Tort:
  • Intentional
  • Strict Liability
  • Negligence

• Intentional Tort:

  • Deliberate act causing harm (e.g., libel, slander, assault).

• Strict Liability:

  • Liability without need of proving negligence (e.g., defective products).

• Negligence:

  • Failure to maintain standard care to protect others.
  • Elements of Negligence:
  1. Legal Duty Owed
  2. Breach of Duty
  3. Damage/Injury
  4. Proximate Cause

• Types of Damages:

  • Compensatory Damages: Cover losses, includes:
  • Special Damages (measurable)
  • General Damages (non-measurable)
  • Punitive Damages: Punish wrongdoers and deter similar conduct.

• Legal Defenses for Negligence:

  • Contributory Negligence: If the injured party contributed to injury, they cannot collect.
  • Comparative Negligence: Shares burden based on fault, includes:
  • Pure Rule
  • 50% Rule (Georgia)
  • 51% Rule
  • Last Clear Chance Rule: Allows recovery if the defendant failed to avoid harm.
  • Assumption of Risk: No recovery if the injured acknowledges inherent dangers.

• Imputed Negligence: One's negligence can be attributed to another under certain conditions.

• Res Ipsa Loquitur:

  • Meaning "the thing speaks for itself"; implies negligence if:
  • The incident does not occur without negligence.
  • Defendant had exclusive control.
  • The injured party did not contribute.

• Property Owner Responsibilities:

  • Trespasser: No protection obligation, cannot intentionally injure.
  • Licensee: Must warn about unsafe conditions.
  • Invitee: Must inspect and remove dangers.

• Attractive Nuisance: A condition attractive to children; liability if children are harmed.

• Negligence in Employment Context:

  • Respondeat Superior: Employers liable for employees' acts.
  • Parental Liability: Parents may be liable for children's actions in specific scenarios.

Chapters 20 & 21 - Personal Auto Policy (PAP)

• PAP Overview:

  • Parts of PAP:
  • Part A: Liability Coverage
  • Part B: Medical Payments Coverage
  • Part C: Uninsured Motorists Coverage
  • Part D: Coverage for Damage
  • Part E: Duties after Accident
  • Part F: General Provisions

• Types of Vehicles Covered:

  • Includes private passenger vehicles, SUVs, trucks (≤ 10,000 lbs) not used for business.

• Part A: Liability Coverage:

  • Essential to cover legal claims from vehicle operation.
  • Coverage includes accident damages and legal defense.
  • Limits:
  • Split Limits (e.g., 100,000/300,000/50,000)
  • Single Limit (e.g., 500,000)

• Compulsory Insurance Laws: Drivers must hold minimum liability to register.

• Part B: Medical Payments Coverage:

  • Covers medical costs for injuries (up to 3 years post-accident);
  • Limits typically 1,000 to 10,000.

• Part C: Uninsured Motorists Coverage (UM):

  • Covers injuries from uninsured/hit-and-run accidents.
  • Statistics: Uninsured rates vary by state (Florida 15.9%).

• Part D: Damage Coverage:

  • Includes both collision and comprehensive coverage.
  • Collision: Covers accidents regardless of fault.
  • OTC (Comprehensive): Covers theft, disasters, vandalism.

• Loss Settlement:

  • Total losses paid based on actual cash value (ACV); partial losses cover repairs.

• Part E: Duties After an Accident:

  • Responsibilities include timely notification to the insurer and cooperation in investigations.

• Part F: General Provisions:

  • Covers policy changes, fraud provisions, and territorial coverage (U.S., Puerto Rico, Canada).

• No-Fault Insurance:

  • Each party collects from their own insurer.

• Major Rating Variables:

  • Factors Influencing Rates:
  • Location, age, vehicle usage, driver education, good student discounts, driving record.