1 Personal Finance: A Gospel Perspective Insurance: Basics, Life and Disability Insurance.
Health, Disability, and Life Insurance
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Health, Disability,and Life Insurance
Chapter 14
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Health Insurance andFinancial Planning
Section 14.1
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What is Health Insurance
Protection from illness or injury Includes both medical expense insurance
and disability income insurance Medical expense insurance pays actual medical
costs Disability income insurance covers income person
lost from illness and injury
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Group Health Insurance
Most people who have insurance are covered under this type of plan
Usually employer sponsored, or by labor unions or professional associations They cover most or all of cost
Cost is fairly low because so many people are insured under the same policy
Coordination of Benefits Allows you to combine benefits from more than one
insurance plan Benefits are limited to 100%
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Individual Health Insurance
Buy from the company of your choice Individual or family plans available
COBRA
Allows those who lose job to keep former employer’s group coverage for a set time
Have to work for a private company or state or local govt. to be eligible
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Basic Health Insurance Coverage
Hospital Expense Some or all of daily cost of room and board Routine nursing, minor medical supplies, use of
other hospital facilities as well Surgical Expense
Pays all or part of surgeon’s fees Physician Expense
Meets some or all of the costs that do not involve surgery
Routine visits, x-rays, lab tests
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Major Medical Expense Insurance Covers long hospital stays and multiple surgeries Coinsurance
Set % of medical expenses you must pay in addition to deductible amount
20 to 25% of expenses
Stop-Loss Provisions Policyholder must pay all costs up to a certain amount then
insurance will pay rest $3,000 to $5,000
Comprehensive Major Medical Pays hospital, surgical, medical, and other bills Limits on what they will pay on expenses
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Dread Disease Policies
Policies sold through the mail, newspapers, magazines
For dread disease, trip accident, death insurance, cancer
Play upon people’s fear and are illegal in many states
Usually only cover very specific conditions which are normally already covered under major medical plans
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Dental Expense Insurance
Encourages preventative dental care and pays for maintenance care
Oral examinations, x-rays, cleanings, fillings, extractions, oral surgery, dentures, and braces
May have a deductible and coinsurance
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Vision Care Insurance
May be part of group plan Covers eye examinations, glasses, contact
lenses, eye surgery, treatment of eye diseases
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Long-Term Care Insurance
Provides expense for daily help you may need if you become seriously ill or disabled and cannot care for yourself
Nursing homes Dressing, bathing, household chores Premiums are $900 to $15,000 depending on
age and amount of coverage
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Major Provisions
Eligibility – defines those covered under a policy (usually spouse and children to a certain age)
Internal Limits – specific levels of repayment for certain services (hospital room could cost $400 a day but internal limit only pays $250)
Co-Payment – flat fee you pay every time you receive a covered service
Preexisting Conditions – conditions diagnosed before the insurance plan took effect; often not covered along with cosmetic surgery
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Health Insurance Plans Should….
Offer basic coverage for hospital and doctor bills Provide at least 120 days hospital room and board
in full Provide at least $1 million lifetime maximum for
each family member Pay at least 80% for out-of-hospital expenses after a
yearly deductible of $500 per person or $1000 per family
Impose no unreasonable exclusions Limit your out-of-pocket expenses to no more than
$3000 to $5000 a year, excluding dental, vision care, and prescription costs
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Private and Govt. Plans
Section 14.2
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Private Health Care Plans
Private Insurance Companies Hospital and Medical Service Plans Managed Care
Health Maintenance Organizations (HMO) Preferred Provider Organizations (PPO) Point of Service Plan (POS)
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Private Insurance Companies
Provide group health plans to employers Premiums may be fully or partially paid for by
employers Employees pay remainder of cost
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Hospital and Medical Service Plans
Blue Cross/Blue Shield are statewide organizations similar to private companies
Each state has a Blue Cross/Blue Shield Blue Cross provides hospital care Blue Shield provides surgical and medical
services
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Managed Care
Prepaid health plans that provide comprehensive health care to their members
Designed to control cost of health care services by controlling how they are used
HMO’s, PPO’s, and Point of Service Plans
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Health Maintenance Organizations (HMOs)
Preapproved doctors to provide care in exchange for fixed, prepaid premiums
Give preventative care like immunizations, screening, diagnostic tests with the idea they will minimize future medical problems
Coverage for surgery, hospital care, and emergency care
Usually pay small co-payment for each service Vision coverage and prescription services are extra Any treatment from doctors not on approved list you
have to pay cost yourself Exception is if there is an emergency that would
threaten your life
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Tips on Choosing HMO
Make sure doctors are near your home You should be able to change doctors if you
don’t like your first choice Second opinions should always be available
at HMO’s expense Should be able to appeal any case in which
HMO denies care
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Preferred Provider Organizations (PPO)
Group of doctors and hospitals agree to provide specified medical service at prearranged fees
PPO plan members pay no deductibles, but may have small co-payments
PPO plan members can go to doctors not on pre-approved list, but may pay larger deductibles and co-payments
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Government Health Care Programs
Medicare Medicaid
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Medicare
Federally funded to those over 65 or those with certain disabilities
Part A – hospital insurance Social Security tax Inpatient hospital and nursing facility care, home health,
and hospice Part B – medical insurance
Doctor’s services and other services not covered by Part A Deductible and 20% coinsurance Supplemental, meaning additional coverage for those who
don’t feel fully covered
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Medicare Finances
In danger Health care costs growing Population of senior citizens growing Projections from 2004 say it will be bankrupt
by 2019 if no changes made
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What is not covered by Medicare?
Skilled or long-term nursing care Out of hospital prescription drugs Routine checkups Dental care Most immunizations If doctor does not accept Medicare’s
approved payment in full, patient must pay themselves
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Medigap
Eligible people are those who receive Medicare
Supplements the gap between Medicare payments and medical costs nto covered by Medicare
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Medicaid
Low income individuals and families Financed by state and federal funds Benefits include:
Physician services Inpatient hospital services Outpatient hospital services Lab services Skilled nursing and home health services Prescription drugs Eyeglasses Preventative care for people under 21
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The US market-based health care system relies heavily on private and not-for-profit health insurance, which is the primary source of coverage for most Americans. According to the United States Census Bureau, approximately 84% of Americans have health insurance; some 60% obtain it through an employer, while about 9% purchase it directly. Various government agencies provide coverage to about 27% of Americans (there is some overlap in these figures).
Public programs provide the primary source of coverage for most seniors and for low-income children and families who meet certain eligibility requirements. The primary public programs are Medicare, a federal social insurance program for seniors and certain disabled individuals, Medicaid, funded jointly by the federal government and states but administered at the state level, which covers certain very low income children and their families, and SCHIP, also a federal-state partnership that serves certain children and families who do not qualify for Medicaid but who cannot afford private coverage. Other public programs include military health benefits provided through TRICARE and the Veterans Health Administration and benefits provided through the Indian Health Service. Some states have additional programs for low-income individuals.
In 2006, there were 47 million people in the United States (16% of the population) who were without health insurance for at least part of that year. About 37% of the uninsured live in households with an income over $50,000.
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Lifestyle Choices:
7 in 10 Americans do not exercise regularly
4 in 10 Americans are not physically active
60 percent of all Americans are overweight
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Prescription Drug Costs:
• 23 prescription drugs account for 50 percent of prescription sales
• $1 billion in sales attributed to 30 drugs • 17 percent increase in cost from 2000 to
2001 or $22.6 billion
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Cost Shifting: 43 Million Americans do not have health
insurance or are underinsured Medical Technology:
Up to 1/3 of the projected increase in health care in the US during the next five years will be the result of new technology
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Disability Insurance
Section 14.3
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Disability Insurance
Cash income when unable to work due to pregnancy, non-work related accident, or an illness
Very common Word disability can vary from insurer to
insurer
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Sources of Disability Income
Worker’s Compensation Employer Social Security Private Income Insurance Programs
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Worker’s Compensation
Result of accident or illness that occurred on the job
Benefits depend on salary and work history
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Employer
Provided through group insurance plans Employer pays part or all of cost Could be continued wages for several
months or for long-term
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Social Security
Eligible if you paid into Social Security system Depends on salary and number of years you’ve
been working Dependents may qualify for some benefits Strict rules
Physical or mental condition that prevents work for at least 12 months
Or, have a condition that may result in death Starts paying 6 months after person is disabled
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Private Income Insurance Programs
Weekly or monthly cash payments to those who cannot work from accident or illness
Pays 40 to 60% of normal income, although some may pay up to 75%
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Disability Insurance Trade-Offs
Waiting or Elimination Period – one to six months, longer the wait the less the cost
Duration of Benefits – look for those that last throughout life
Amount of Benefits – look for benefit that will equal 70 to 80% when added to other sources of income
Accident and Sickness Coverage – look for those that also pay for sickness in addition to accidents
Guaranteed Renewability – make sure that they will not cancel coverage when you fall ill
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Life Insurance
Section 14.4
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What is Life Insurance?
Contract in which you pay a certain premium periodically
Stated money amount paid upon your death Paid to your beneficiary – person named to
receive your benefits
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Purpose of Life Insurance
Pay off mortgage or other debt Money for children when they reach certain age Education or income for children, survivors Charitable donations Retirement income Accumulate savings Set up an estate plan Pay estate and death taxes
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Principle of Life Insurance
Estimate how long people will live Set the price of life insurance on tables Higher premiums for those who will die
sooner
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Types of Life Insurance Policies
Term Insurance Pays out only if you die during the term it covers May only get covered for the time you have children
Renewable Term - allows to renew after original term is up
Multiyear Level Term – Guarantees you pay the same premium for the duration of policy
Conversion Term – Allows you to change from term to permanent, with a higher premium
Decreasing Term – Pays less to beneficiary as time passes
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Whole Life Insurance
Pay a set amount for the rest of your life Also serves as an investment