Chapter 12

Learning Objectives (part 1 of 2) Name the basic types of medical insurance policies and describe their features Describe the different types of managed care programs Identify the six choices available under Medicare Distinguish between Medicaid and Medicare

Learning Objectives (part 2 of 2) Analyze the pros and cons of long-term care insurance Describe the key features of disability income insurance Discuss the role of Social Security disability benefits and worker’s compensation as they affect the amount of disability income insurance one should obtain

Basic Types of Medical Insurance Policies Basic Policy Major Medical Policy Indemnity Policy Medigap policy Long-Term Care Policy Group Policy

Basic Policy First Dollar Coverage Covers Initial Expenses Has Upper Limits Example: Hospital-Surgical

Major Medical Designed to pick up where basic policies leave off Should be purchased in tandem with a basic policy

Fee-for-Service Policies Both Basic & Major Medical are known as fee-for-service policies Usually include coinsurance and deductibles Patient selects physician, pays for services, submits for reimbursement Insurer pays “reasonable and customary charges”

Indemnity Policies Do not explicitly cover medical expenses Pay a fixed dollar rate per day under specified conditions Examples: a hospital indemnity policy pays a per diem while in hospital Specific disease policy

Managed Care Three types of plans Health Maintenance Organization (HMO) Preferred Provider Organization (PPO) Point-of-Service Plans (POSs) Two types of HMOs Exclusive HMO (primary care physician) Individual practice HMO (IPA-HMO)

PPO vs. POS Plans PPO is a fee-for-service plan Patient limited to providers in the PPO’s network POS provides a primary care physician

Medicare Part of Social Security Benefits Six choices for participation Original Medicare Plan (OMP) OMP with a Supplemental Insurance Policy Medicare Managed Care Plan Private Fee-for-Service Plan Medicare Medical Savings Account Plan (MSA) Religious Fraternal Benefit Society Plan (RFB)

Original Medicare Plan Part A: Hospital Insurance Enrollment automatic if entitled to Social Security benefits Part B: Medical Insurance Individuals must enroll Premium is paid as a reduction in Social Security benefit Many gaps in Medicare coverage (even with both parts)

Covering Medicare’s Gaps Retirees should have one or more of the following policies: Medicare Managed Care Medicare Select Medicaid Medigap Retiree health benefits Long-term care insurance

Medicare Managed Care Plans HMOs for people entitled to Medicare, four different organizational structures Health Maintenance Organization (HMO) HMO's with Point of Service Option (POS) Provider sponsored Organization (PSO) Preferred Provider Organization (PPO)

Medicaid Jointly funded, Federal-State health insurance program for specified low- income and needy people Originally for people eligible for Aid to Families with Dependent Children (AFDC) Rules vary among states

Long-Term Care Insurance (1 of 2) Covers cost of living in a nursing home Key elements of a policy Elimination peroid Maximum lifetime benefit Cost-of-living adjustment (COLA) Cheaper when younger, but not everyone will need the benefits

Long-Term Care Insurance (2 of 2) Key features to look for in a policy Make sure daily benefit adequate to cover daily cost in a nursing home Annual inflation rider (COLA) Make sure benefits last at least 3 years Generous definition of qualification for nursing home admission Renewable for life & waiver of premiums

Disability Income Insurance At least as important as life insurance Key elements of a policy Replacement ratio (upper limit 50% to 70%) Elimination period (2 weeks to 6 months) Duration of benefits (2 years to age 65) Residual rider Guaranteed future insurability

Alternatives to disability income insurance Social Security disability income Available only to covered workers Six months elimination period Strict rules on definition of disability Worker’s Compensation Injury will not necessarily occur at work Even if it does, several exceptions to quality for coverage