20 - 1Copyright 2008, The National Underwriter Company Types of Individual Health Insurance Coverage  What is it?  Provides reimbursement for certain medical & hospital expenses  Generally issued by an insurance company  Two major types  Prepaid plan  Healthcare providers paid before care is delivered  Health Maintenance Organization – most common type  Postpaid plans  Care providers and insureds reimbursed after care has been received Chapter 20 Risk Management For Financial Planners

20 - 2Copyright 2008, The National Underwriter Company  When is the use of this tool indicated?  Basic health insurance coverage essential part of financial security  In 2002  52.2% had health insurance through employer  16.2% were uninsured  In 2005  15.9% were uninsured  Tax implications  Premiums are deductible as a medical expenses  In excess of 7.5% of their adjusted gross income  Benefits paid are not taxable to the covered individual Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

20 - 3Copyright 2008, The National Underwriter Company  Design features  Hospital-Surgical Coverage  Coverage for hospitalization and surgery  Certain expenses that are covered are defined in the policy  Hospital room and board  Lab services  X-rays and medicine  nurses, radiologists, anesthetists  Physician in-hospital charges  Outpatient services  Maternity services Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

20 - 4Copyright 2008, The National Underwriter Company  Design features  Benefits  Usually expressed as a dollar amount per day or  Usually and customary charge for a particular service  Surgical schedule  Fee that imposes an upper limit for surgical procedures  Major Medical Coverage  Supplemental  Supplements the basic hospital-surgical expense plan Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

20 - 5Copyright 2008, The National Underwriter Company  Design features (cont’d)  Major Medical Coverage (cont’d)  Comprehensive  Wraps into a single plan all coverages provided by both the basic hospital-surgical expense plan and the supplemental plan  Streamlined and easier to use  Does not have the overlapping of coverage from several different policies  Cover more services and pays greater benefits than the basic coverages  Policy has exclusions and limitations for various services  Pre-existing conditions  Usual and customary expense limitations Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

20 - 6Copyright 2008, The National Underwriter Company  Design features (cont’d)  Major Medical Coverage (cont’d)  Policy deductibles  Pre-defined covered expense that the policyholder must pay out of pocket  Example – Policy holder has a deductible of $500 and incurs a covered expense of $1,200  Policy holder pays the first $500 of the expenses and the insurance company pays most of the remaining $700 of expenses  Usually one deductible per policyholder per calendar year.  After the deductible has been net, the insurance company pay all the remaining expenses Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

20 - 7Copyright 2008, The National Underwriter Company  Design features (cont’d)  Major Medical Coverage (cont’d)  Co-insurance  Policyholder and insurance company pay a portion of each covered expense after the policy deductible has been met  Example  20%/80% split – the insured pays 20% of the expenses after the deductible and the insurance company pays the remaining 80%  Overall coinsurance limit for the insured  A maximum “out-of pocket” expense limit paid by the insured  Example - $500 deductible, then 20% / 80% coinsurance for the next $10,000 in expenses  Out-of-pocket maximum for the insured = $2,500 Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

20 - 8Copyright 2008, The National Underwriter Company  Design features (cont’d)  Major Medical Coverage (cont’d)  Maximum benefit limitation for policy  Maximum policy will pay the insured during their lifetime  Typically $1,000,000 or $2,000,000 or as high as $5,000,000  Traditional Indemnity  Pays a dollar amount for each day the insured is hospitalized ($100 to $400)  Paid in addition to other coverages Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

20 - 9Copyright 2008, The National Underwriter Company  Health Maintenance Organizations (HMO)  Organization of physicians and other health care providers that provide health care on a pre-paid basis  Alternative to traditional health insurance  Advantages  Covers more types of health care services than traditional coverages  Lower co-payments and deductibles  Disadvantages  Must use a network provider  Specialist must be referred by your primary care physician Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

Copyright 2008, The National Underwriter Company  Preferred Provider Organizations (PPO)  Type of managed care organization  Contracts between the sponsor and health care providers  Can also be a group of health care providers who contract with an insurer to treat policy holders according to a set fee schedule Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

Copyright 2008, The National Underwriter Company  Preferred Provider Organizations (PPO)  Examples  A single hospital and it’s practicing physicians that contract with a large employer  A national network of physicians, hospitals and labs that contract with and insurer or employer groups  Using a PPO provides discounts from standard fees and incentives for using them as opposed to someone outside their network Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

Copyright 2008, The National Underwriter Company  Medicare Supplemental Coverage  Medicare Part A  Pays for hospitalization, skilled nursing facilities, home health services and hospice care  Proved without cost to everyone 65 and older who is eligible for social security  Hospitalization co-pays and deductibles  Days 1 through 60 – Insured pays a daily deductible  Days 61 through 90 - Insured pays a daily co-payment  Days 91 Plus – Insured pays 100%.  Insured could access a lifetime reserve of 60 days where he/she pays a co-payment instead of all the expenses at this point. Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

Copyright 2008, The National Underwriter Company  Medicare Supplemental Coverage (cont’d)  Medicare Part A (cont’d)  Skilled nursing care  Pays for skilled nursing home care up to the first 100 days of care  Days 1 through 20 – Insured pays Zero  days 21 through 100 – Insured pays a Daily deductible  Days 100 Plus – Insured pays 100%  Medicare Part B  Voluntary – requires insured pay a premium  Coverage for doctor’s bills, surgical procedures, outpatient services and medical supplies Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

Copyright 2008, The National Underwriter Company  Medicare Supplemental Coverage (cont’d)  Medigap - 12 standardized types of supplemental policies  Plans “A” through “J” provide core benefits plus optional benefits  Plan “A” – Core benefits  Co-insurance days 61 through 90 for hospitalization  Co-insurance days 91 through 150 for hospitalization  Hospital insurance expenses for an extra 365 days in the hospital  Part A and part B deductible for the first 3 pints of blood  Part B co-insurance (20% of allowable charges)  Plans “K” and “L” offer catastrophic coverage without the core benefit package  Open enrollment period  Six months after the insured turns age 65  Policies are guaranteed renewable Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage

Copyright 2008, The National Underwriter Company  Alternatives  Self funding  Save enough to pay medical expenses out of pocket  Unrealistic to expect a individual to be able to set aside enough to cover possible medical bills  Group health insurance coverage  Provided through an employer or association  Cost is usually shared between and employer and employee  Open-enrollment period Chapter 20 Risk Management For Financial Planners Types of Individual Health Insurance Coverage