Chapter 11:
Health Care Planning
Objectives
 Identify the major sources of health care
plans.
 Describe the major types of coverage
provided by health care plans.
Objectives
 Explain the major provisions of health
care plans and insurance policies.
 Describe the purpose and major features
of disability income insurance.
How Can You Reduce Your
Personal Health Care Costs?
 Stay well - focus on prevention
 eat a balanced diet and keep your
weight under control
 avoid smoking and don’t drink to
excess
 get enough rest, relaxation, and
exercise
 drive carefully and look for accident
and fire hazards in your home
Health Insurance and
Financial Planning
 Protection against financial
loss due to illness or injury.
 Part of your overall risk management plan
to safeguard your family’s economic
security
 medical expense insurance
 disability income insurance to protect
your most valuable asset - your ability to
earn an income
Health Care Planning
FOUR LOSS TYPES:
 Direct medical care
 Recuperative care
 Rehabilitation
 Replacement of income
Health Care Providers
 Individual
 Group
 Lower rates
 Employee fringe
 Coverage for existing health problems
Health Insurance and
Financial Planning
(continued)
 Group plans comprise more than 85% of all
health insurance issued
 Most group plans are sponsored by
employers, with the employer paying most or
all of the cost
 Group plans can be supplemented with
individual plans
 Following divorce, a former spouse can remain
covered for three years, but the premiums can
be as high as $4,000 a year
Health Care Providers
 Private insurance companies
 Managed care plans
 Preferred provider
 Health maintenance
Health Care Providers
 Government plans
 Medicare
 Medicaid
Health Care Coverages
 Hospital
 Surgical
 Medical expense
 Major medical expense
 Comprehensive health
 Dental expense and vision care
A Good Health Insurance Plan Should..
 Provide quality care at a reasonable cost
 Offer basic coverage for doctor and hospital bills
 Cover 120 days’ hospital room and board
 Provide at least $1,000,000 lifetime maximum
per person
 Pay 80% of out-of-hospital expenses after the
deductible is met
 Have no unreasonable exclusions
 Limit out-of-pocket expenses
Types of Health Care Coverages
 Hospital
 hospital room, operating room, lab tests,
X-rays, medicine
 Hospital indemnity
 pays a fixed amount for each day in
hospital. Best for people in high risk groups
 Surgical
 surgeon's fee
 Physician
 office visits, lab tests and X-rays
Types of Health Care Coverages
(continued)
 Major medical
 covers expenses for a
long term injury or illness
 Comprehensive major medical
 low deductible offered
without a separate, basic plan
 Dread disease
 focuses on unrealistic fears, and only pays
out for very specific conditions. Often sold
by people working on commission.
Types of Health Care Coverages
(continued)
 Dental
 group coverage for exams, cleaning,
x-rays, fillings, oral surgery
 Vision care
 some group plans include
exams and glasses
 Long term care
 fastest growing coverage, especially
for women
Health Care Coverages
 Medicare supplement (Medigap)
 Long-term care
 Accident and dread disease
Why Do People Buy
Long-Term Care Insurance?
To avoid losing assets
23.0%
To avoid dependence
25.0%
Protect standard
of living
15.0%
Other reasons
25.0%
Guarantee services
12.0%
1996, Teacher's Insurance and Annuity Association
Making Sense of Health Benefits
 GENERAL TERMS AND PROVISIONS:
 Definitions
 Who is covered
 Time period
Making Sense of Health Benefits
PAYMENT LIMITATIONS:
 Policy Limits
 Deductibles and copayments
 Coinsurance
 Coordination of benefits
Making Sense of Health Benefits
COVERAGE LIMITATIONS:
 Based on timing of loss
 General exclusions
 Maternity benefits
Disability Income Insurance
Disability income insurance replaces a
portion of the income lost when you cannot
work because of illness or injury.
 The chances of becoming disabled for at
least three months are seven times greater
than the chances of death!
Disability Income Insurance
 Level of need
 Important policy provisions
 Elimination period
 Benefit period
 Degree of disability
Disability Income Insurance
 Important policy provisions (continued)
 Residual clause
 Social Security rider
 Cost-of-living adjustments
How Long Your
Money Will Last
Trade-Offs in Choosing a Policy
 Reimbursement versus indemnity
 Inside limits versus aggregate limits
 Deductibles and coinsurance
 Out-of-pocket limit, or stop-loss
 Benefits based on reasonable and
customary charges
How to Choose an HMO
Consider the following factors
 accessibility
 convenient office hours
 alternative physicians
 second opinions
 type of coverage
 appeal procedures
 price