Bảo hiểm - Chapter 15: Individual health insurance coverages

Chapter 15Individual Health Insurance CoveragesAgendaHealth Care Problems in the USIndividual Health Insurance CoveragesMajor Medical InsuranceMajor Medical Insurance and Managed CareHealth Savings AccountsLong-term Care InsuranceDisability-Income InsuranceIndividual Medical Expense Contractual ProvisionsShopping for Individual Health InsuranceHealth Care Problems in the USThe US Health care delivery system has four major problems:Rising health care expendituresLarge number of uninsured in the populationUneven quality of medical careConsiderable waste and inefficiencyHealth Care Problems in the USProblem 1: Rising Health Care ExpendituresHealth care expenditures in the US have increased substantially over time and are growing faster than the national economyEstimated national health expenditures totaled just over $2.5 trillion in 2009, or 16.9 percent of the nation’s GDP.One in six dollars of the nation’s income is spent on health care.Exhibit 15.1 The United States Ranks First in the World on Health- Care Spending—International Health-Care Spending as a Percentage of Gross Domestic Product (GDP)Health Care Problems in the USReasons for the increase in health care expenditures include:Increase in consumer demandAdvances in technologyCost insulation because of third-party payersEmployment-based health insuranceState mandated benefitsIncreased spending on prescription drugsCost shifting by Medicare and MedicaidHigher administrative costsRising prices in the health care sectorAging of the population is not a major contributing factorHealth Care Problems in the USProblem 2: Many people do not have health insurance coverage45.7 million people, or 15.3% of the US population had no health insurance coverage in 2007Groups with large number of uninsured include:Foreign bornHispanics, Blacks, and Asians Young adultsLow income householdsMany people are uninsured because the coverage is not affordableMany low income people who are eligible for Medicaid are not aware they are eligibleExhibit 15.2 More Than Half of Americans Say Family Skimped on Medical Care Because of Cost in the Past Year; Worries About Affordability and Availability of Care RiseExhibit 15.3 Reasons for Not Having Health InsuranceHealth Care Problems in the USProblem 3: Uneven Quality of Medical CareThe quality of medical care varies widely depending on geographic locationMany patients do not receive the most effective careProblem 4: Waste and InefficiencyCritics believe the administrative costs of delivering health insurance benefits are excessively highPaperwork is excessive There is a duplication of expensive technology in hospitals in large citiesInsurance fraud and abuse are widespreadHealth Care Problems in the USMany health care reform proposals have been suggested in the past 35 yearsObama’s plan has three major objectives:To make health insurance available and affordable to all Americans, building on the present systemTo lower health care costs by investing in health information technologyTo promote public health by requiring coverage of preventive servicesIndividual Health Insurance CoveragesIndividual medical expense plans are purchased by:People who are not employedRetired workersCollege studentsCommon forms of individual coverage include:Major medical insuranceHealth savings accountsLong-term care insuranceDisability-income insuranceMajor Medical InsuranceMajor medical insurance is designed to pay a high proportion of the covered expenses of a catastrophic illness or injuryPlans are characterized by:High lifetime limitsBroad range of benefits, includingInpatient hospital servicesOutpatient servicesPhysician servicesSurgeons and physicians reimbursed on the basis of reasonable and customary chargesOutpatient prescription drugsUnder an integrated approach, charges for prescription drugs are subject to the same deductible and coinsurance charges that apply to other expensesUnder a separate drug card program, prescriptions are subject to separate deductible and copayment chargesMajor Medical InsuranceA benefit period, or length of time for which benefits are paid after a deductible is satisfied A deductible is used to eliminate small claims and the high administrative cost of processing small claimsA calendar-year deductible is an aggregate deductible that has to be satisfied only once during the calendar yearA family deductible specifies that medical expenses for all family members are accumulated to satisfy the deductibleUnder a common-accident provision, only one deductible has to be satisfied if two or more family members are injured in one accidentA coinsurance provision requires the insured to pay a certain percentage (typically 20-25 %) of eligible medical expenses in excess of the deductiblePurpose is to reduce premiums and prevent overutilization of policy benefitsA copayment is a flat amount the insured must pay for benefitsMajor Medical InsuranceThe insured’s total out-of-pocket spending is limited by an out-of-pocket limit (also called a stop-loss limit), after which the insurer pays 100% of eligible expensesThe out-of-pocket limit reduces the crushing financial burden of a catastrophic lossCommon exclusions to a major medical policy include cosmetic surgery and expenses covered by workers compensation Plans may have internal limits for some types of expenses, such as hospice care and treatment for alcoholismMajor Medical Insurance and Managed CareMany individual major medical policies sold today are part of a managed care plan.A managed care plan provides benefits to insureds in a cost-effective manner, with heavy emphasis on cost controlMajor medical plans now incorporate many elements of managed care, such as requiring approval for some hospital admissionsHealth Savings AccountsA health savings account (HSA) is a tax exempt account established exclusively for the purpose of paying qualified medical expensesThe beneficiary must be covered under a high-deductible health plan to cover catastrophic medical billsThe account holder can withdraw money from the HSA tax-free for medical costsContributions and annual out-of-pocket expenses are subject to maximum limitsHealth Savings AccountsAn HSA investment account in a qualified plan received favorable tax treatmentParticipants pay premiums with before-tax dollarsInvestment earnings accumulate tax-freeProponents argue that HSAs can help keep health care costs down because consumers will be more sensitive to costs, will avoid unnecessary services, and will shop aroundCritics argue that HSAs will encourage insureds to forego preventative care Long-Term Care InsuranceLong-term care insurance pays a daily or monthly benefit for medical or custodial care received in a nursing facility, in a hospital, or at homePeople who reach age 65 will likely have a 40% chance of entering a nursing home, and about 10% of them will stay there five years or morePlans come in three main forms:A facility-only policy A home health care policyA comprehensive policy Long-Term Care InsuranceDaily benefits range from $50 - $300 or moreMost policies are reimbursement policies, which reimburse for actual charges up to a daily limitSome policies reimburse on a per diem basisMany insurers offer policies with pooled benefits, which provide a total dollar amount that can be used to pay for the deferent types of long-term care servicesAn elimination period is a waiting period during which time benefits are not paidLong Term Care InsuranceIn a qualified plan, a benefit trigger must be met to receive benefits. Either,The insured is unable to perform a certain number of activities of daily living (ADLs), orThe insured needs substantial supervision to be protected against threats to health and safety because of a severe cognitive impairmentSince inflation can erode the real purchasing power of the daily benefit, some plans offer automatic benefit increasesPolicies are guaranteed renewableCoverage is expensiveLong Term Care InsuranceMost insurers offer optional nonforfeiture benefits, which provide benefits if the insured lapses the policyUnder a return of premium benefit, the policyholder receives a cash paymentUnder a shortened benefit period option, coverage continues but the benefit period or maximum dollar amount is reducedLong-term insurance that meets certain requirements receives favorable income tax treatmentPremiums are deductible under certain conditionsPer diem benefits are subject to daily limitsDisability-Income InsuranceThe financial impact of total disability on present savings, assets, and ability to earn an income can be devastatingDisability-income insurance provides income payments when the insured is unable to work because of sickness or injuryIncome payments are typically limited to 60-80% of gross earningsDisability-Income InsuranceThe four most common definitions of total disability are:Inability to perform all duties of the insured’s occupationInability to perform the duties of any occupation for which the insured is reasonably fitted by education, training, and experienceInability to perform the duties of any gainful occupationLoss-of-income test, i.e., your income is reduced as a result of sickness or accidentMost insurers use a combination of 1 & 2Disability-Income InsurancePartial disability is defined as the inability of the insured to perform one or more important duties of his or her occupationSome policies offer partial disability benefitsUsually, partial disability benefits must follow total disabilityThe partial disability benefits are paid at a reduced rate for a shorter periodResidual disability means a pro rata disability benefit is paid to an insured whose earned income is reduced because of an accident or sicknessThe typical provision has a time and duties test that considers both income and occupationDisability-Income InsuranceThe benefit period is the length of time that disability payments are payable after the elimination period is metMost disabilities have durations of less than two yearsIndividual policies normally contain an elimination period, during which time benefits are not paidThe typical elimination period is 30 daysA waiver-of-premium provision allows for future premiums to be waived as long as the insured remains disabledPolicies typically include a rehabilitation provision and some pay accidental death, dismemberment and loss-of-sight benefitsA cost-of-living rider can be added to adjust benefits for increases in the cost of livingIndividual Medical Expense Contractual ProvisionsSome common contractual provisions address the renewability of the policyUnder an optionally renewable policy, the insurer has the right to terminate a policy on any anniversary dateA “nonrenewable for stated reasons only” provision allows the insurer to terminate coverage only for certain reasonsA guaranteed renewable policy is one in which the insurer guarantees to renew the policy to some stated agePremiums can be increased for the underwriting classUnder a noncancellable policy, the insurer guarantees renewal of the policy to some stated agePremiums cannot be increased during that periodIndividual Medical Expense Contractual ProvisionsTo control adverse selection, individual policies usually contain some type of preexisting-conditions clauseThe clause limits coverage for a physical or mental condition for which the insured received treatment prior to the effective date of the policySome states limit these exclusion periods, e.g., for 12 monthsSome contractual provisions address claims: Under a notice of claim provision, the insured must give written notice to the insurer within 20 days after a covered loss occursUnder a claim forms provision, the insurer is required to send the insured a claim form within 15 daysUnder the proof-of-loss provision, the insured must send written proof of loss to the insurer within 90 days Individual Medical Expense Contractual ProvisionsThe grace period is a 31-day period after the premium due date to pay an overdue premiumThe reinstatement provision permits the insured to reinstate a lapsed policy, subject to payment of premiums and a 10-day waiting period for sicknessThe time limit on certain defenses states that after the policy has been in force for two years, the insurer cannot void the policy or deny a claim on the basis of misstatements in the application, except for fraudulent misstatements