Transcript PPT 7 - Joplin Business Department

Chapter 7
Insuring Your Health and
Your Life
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All rights reserved
Learning Objectives
• Explain why health insurance is important
• Describe different features of health
insurance
• Explain the need for life insurance
• Describe the ways people obtain insurance
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The Importance of Health
Insurance
• Health insurance
provides payments to
people who suffer a
financial loss as a
result of illness or
injury
• People covered by health
insurance limit their potential
liabilities
• It ensures that they receive
adequate medical care
• Medical care can be very
expensive
• Adequate health insurance is an
important component of your
financial plan
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Sources of Health Insurance
• Health insurance is available in many forms
• Some people get their coverage from private
companies
• Many people get coverage as a company
benefit
• See Figure 7.1 for an example of EmployerProvided Health Care Coverage
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Figure 7.1
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Sources of Health Insurance
• Medicare is a governmentsponsored health insurance
plan that is funded largely
by taxes that most working
people pay.
• Medicaid is a governmentsponsored program that
provides health insurance
for low-income individuals
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• The federal government has
two health care plans that
are available to some
individuals:
– Medicare
– Medicaid
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Sources of Health Insurance
• A premium is a
regular payment in
return for
insurance coverage
• Medicare provides benefits to senior
citizens or to individuals who are
disabled
• Medicare consists of two components:
Part A and Part B
• Part A is hospital insurance, which
recipients receive at no cost to them
• Part B covers doctor visits and other care
provided outside a hospital
• Part B recipients must pay some
premium for this coverage
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Sources of Health Insurance
• Medicaid is administered on a state-by-state
basis
• The coverage is designed for the elderly,
blind, disabled, and needy families with
dependent children
• Many people have no health care coverage
• These people can face very expensive health
charges
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Health Care Costs
• Health care can be very expensive (see Figure 7.2)
• Health insurance is a critical risk-reduction tool of
your financial plan
• In 2010, health care spending by Americans
averaged nearly $8,233 for each man, woman, and
child
• Your decision is not whether to purchase health
insurance
• Instead, decide what type of plan to get and how
much coverage to obtain
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Figure 7-2
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Check Your Financial IQ
• Why is health insurance a critical part of
your financial plan?
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Check Your Financial IQ
• People without health insurance could find
all of their net worth quickly eliminated with
one major health problem
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Health Insurance Features and
Terms
• Insurance plans come in many forms and
provide a range of coverage and services
• Know about the features and terms
commonly used when deciding what health
care plan is right for you
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Indemnity Plans versus Managed Care
• Health care plans are classified as indemnity
plans or managed care plans
• Indemnity plans allow participants to seek
health care from any qualified medical
provider
• Managed care plans limit participants to a
specific list of providers
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Family Coverage
• A policyholder is a
person who buys a
health insurance
policy or
subscribes to it
through an
employer.
• Many health insurance plans
provide coverage for immediate
family members
• Children may become ineligible
for coverage once they reach a
certain age or status
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Group Plans
• Groups plans are
insurance plans
that cover a large
group of
individuals
• An individual’s high risk or loss is
spread across the entire pool of
group members
• Each group member has the same
access to health care
• Each member also pays the same
coverage even if some have more
health problems than others
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Math for Personal Finance
• Michael needs laser eye surgery to correct
his vision. After a visit to the
ophthalmologist, he learns that the surgery
will cost about $4,500 but that the procedure
is not covered.
• How much will Michael be required to pay
for the surgery?
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Math for Personal Finance
• Solution: Michael will be responsible for the
entire cost of the surgery ($4,500) because it
is not a covered procedure
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Location Restrictions
• Location Restrictions can apply to some
health insurance coverage
• Some United States insurance companies
will cover medical care delivered inside the
US only.
• Others will provide coverage in foreign
countries
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Preexisting Conditions and
Cancellation Options
• Preexisting conditions
are health conditions
that existed before your
policy was granted
• Insurance policies may exclude
coverage for preexisting
conditions
• Some health insurance plans
allow the insurance company to
cancel the policy at any time
• Others guarantee coverage as
long as you pay your insurance
premiums on time
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Deductibles
• A deductible is the
amount the
policyholder has to
pay before
insurance policies
begin paying
claims.
• Some insurance policies pay claims
after the policyholder has paid a
certain amount of money
(deductible)
• After you pay a deductible, your
insurance company will begin to pay
for some of the covered expenses
• The higher the deductible, the lower
your cost for insurance
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Math for Personal Finance
• Jontell needs surgery on her foot. Assume
that she has insurance and the surgery cost
$5,000 and she has a $500 deductible. She
also has 20 percent co-pay.
• How much will Jontell have to pay for the
surgery?
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Math for Personal Finance
• Solution: Jontell will have to pay the $500
deductible and then 20 percent of the
remaining amount. Therefore, she will pay
$500 + .20($5,000 - $500)= $1,400
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Coverage Limits
• Many policies limit the total amount they
will pay for certain procedures
• Some policies may exclude some procedures
completely
• Many policies limit the number of days of
hospital care they will pay for or the
frequency of certain treatments
• Policies also differ on coverage for
prescription drugs
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Coinsurance
• Coinsurance is the
term used for the
share of costs for
covered services
that the insured
person is required to
pay out of his or her
pocket
• Coinsurance is often called a copay
• Co-pay amounts usually apply to
most medical services
• For example, most policies have
a $20 co-pay for a doctor’s visit
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Provider Networks
• Managed health care plans limit your choice
of health care provider to a specific list of
medical professionals.
• The two most common types of provider
networks are:
– Health Maintenance Organizations (HMOs)
– Preferred Provider Organizations (PPOs).
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Provider Networks
• HMOs are based on negotiated agreements
with specific doctors to provide health care.
• Individuals choose a primary care physician
from an approved list
• Individuals must be referred for any
additional specialized care.
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Provider Networks
• PPOs are similar to HMOs, but provide a
larger network of providers
• PPOs typically cost more than HMOs
• Refer to Figure 7.3 for a comparison of the
different types of private health insurance
plans
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Figure 7.3
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Auto Policies
• Your automobile insurance will contain
limited accident coverage
• This insurance may also pay a portion of
your medical costs associated with a vehicle
accident
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Check Your Financial IQ
• Why is it important to understand the
different features and terms used in health
care plans?
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Check Your Financial IQ
• Different features can greatly affect your
costs and the level of service you receive
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Life Insurance
• Life insurance
provides a payment
to a specific person
or persons when the
policy holder dies
• A beneficiary is the
person who receives
the payment
• People buy life insurance from a
company
• These policyholders pay periodic
premiums
• Many employers provide fully or
partially paid life insurance
coverage for their employees as a
benefit
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Role of Life Insurance
• Life insurance is a component of your financial
plan
• Life insurance helps to ensure that those who
depend on you have financial support in the event
of your death
• Some people carry life insurance to cover the costs
incurred when they die
• Some people get life insurance when they are
young because it can be costly or difficult to obtain
it as you get older
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Types of Life Insurance
• Life insurance comes in several different forms:
– Term insurance
– Whole life insurance
– Universal life insurance
• These forms differ in the following ways:
– how long they provide coverage
– how much they cost
– whether or not they provide any sort of benefit
besides a payment at death.
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Types of Life Insurance: Whole Life
Insurance
• Whole life insurance
provides coverage for
as long as the
policyholder
continues to pay the
premium
• Whole life insurance is
sometimes referred to as
permanent insurance
• These types of policies build up
savings for the policyholder over
time
• Part of what you pay in premiums
goes into an account over time
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Types of Life Insurance: Whole Life
Insurance
• As the account builds a “cash value, you may
be able to borrow against it or even take cash
out.
• At some point, the cash value of the policy may
be used to pay your premiums until your death
• Whole life insurance policies can serve as a
source of liquidity and as an investment in your
financial plan
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Types of Life Insurance: Term Insurance
• Term insurance is
life insurance
provided over a
specific period of
time
• Term insurance policy builds no
savings and does not serve as an
investment
• It usually ranges between 5 and 20
years
• For these reasons, it generally has
lower premiums
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Types of Life Insurance: Universal Life
Insurance
• Universal life
insurance
provides coverage
for a specified
term and builds
savings for the
policyholder
• Universal life insurance is a
combination of term insurance and
whole life insurance
• Universal life allows more flexibility
than other types of life insurance
• For example, you can add units of
term coverage for periods of time
• You can also alter your payments
during your life
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Math for Personal Finance
• The premiums to Janice’s $200,000 whole
life policy total $1,300 a year. A term
insurance policy for $200,000 might cost
Janice $400 in premiums. Janice bought the
term policy and invested the difference,
earning a rate of 8 percent.
• How much money could she “make” in a
year?
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Math for Personal Finance
• Solution: Janice would have $900 to invest.
$900 x .08 = $72
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Check Your Financial IQ
• What is the main purpose for buying life
insurance?
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Check Your Financial IQ
• People buy life insurance to make sure that
when they die their dependents have
financial support
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Getting Insurance
• Most Americans rely on their employers for
access to health insurance
• Employers usually pay some or even all the
premiums for health or life insurance
• Employer-provided coverage can represent a
large portion of the employee’s overall
compensation
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Getting Insurance
• There are laws that help ensure that a person
who leaves a job can continue to get access
to health coverage
• This is true even if he or she has developed a
serious health problem
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Getting Insurance
• The Health Insurance
Portability and Accounting
Act (HIPAA) ensures that
workers can continue their
health insurance coverage
even if they switch jobs
• Consolidated Omnibus
Budget Reconciliation Act
(COBRA) allows you to
continue health insurance
coverage for up to 18 months
after your employment ends
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• HIPAA prohibits insurance
companies from denying
new employees access to
coverage based on their
health or preexisting
conditions
• With COBRA you are
required to pay the premiums
that your previous employer
was paying for your
coverage
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Getting Insurance
• COBRA and HIPAA make sure people
switching jobs can maintain health insurance
coverage during and after the switch
• Some companies offer employees a chance
to get health coverage after retirement
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Getting Insurance
• Disability
insurance provides
regular payments to
replace lost income
in the event injury or
illness makes it
impossible to work
• Employers often provide other
insurance-related benefits, such
as:
– Disability insurance
– Dental insurance
– Vision insurance
• If your employer does not offer it
or if you are self-employed, you
may want to buy disability
insurance
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Getting Insurance
• Insurance has different kinds of coverage and
prices
• The Internet can inform you about the different
types of products and services
• Insurance agents are also available to discuss these
options
• Choosing insurance coverage is a major financial
decision and should be made with as much
information as possible about your options
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Check Your Financial IQ
• What has been the most common means of
obtaining health insurance in recent years?
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Check Your Financial IQ
• An employer-offered plan is the most
common
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Summary
• Insurance is the promise of payment to be made
in the event of some kind of loss
• Health insurance provides payment to
policyholders who suffer a loss as a result of
illness or injury
• Health insurance is available in different forms
such as: Medicare or Medicaid, private
companies, or through employers
• Insurance plans come in many forms and
provide a range of coverage and services
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Summary
• Some issues to be
aware of when
considering insurance
programs include:
–
–
–
–
–
family coverage
location
preexisting conditions
cancellation options
Deductibles
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–
–
–
–
–
–
coverage limits
Coinsurance
provider networks
referral limits
prescription coverage
student policies
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Summary
• Life insurance is an important component of
your financial plan
• Life insurance ensures your dependents have
financial support in the event of your death
• Several options are available
– term insurance
– whole life insurance
– universal life insurance
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Summary
• Employers are a main source of insurance
• An individual may purchase health or life
insurance
• It is important to investigate all your options
before you purchase insurance
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Key Terms and Vocabulary
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•
•
•
•
•
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Beneficiary
COBRA
Coinsurance
Deductible
Disability insurance
Fraud
Group plan
Heath insurance
HIPAA
Insurance
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•
•
•
•
•
•
•
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•
Liability
Life insurance
Medicaid
Medicare
Policyholder
Preexisting condition
Premium
Term insurance
Universal life insurance
Whole life insurance
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URLs
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www.medicare.gov
www.insurancefraud.com
http://www.kaiseredu.org/topics
www.nchc.org/facts/cost.shtml
www.census.gov
www.insure.com
www.insuweb.com
www.ehealthinsurance.com
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