Personal Finance Garman/Forgue Tenth Edition Chapter 11: Managing Health Expenses PPT slide program prepared by Amy Forgue and Ray Forgue.

Introduction Health care issues that impact personal finances Direct Medical Care Costs Rehabilitative and Custodial Care Costs Lost Income Copyright ©Houghton Mifflin Company. All rights reserved.

Your Next Five Years In the next five years: 1. Sign up for an employer-sponsored premium conversion plan and a flexible spending arrangement for health care, whenever they are available, to save money on taxes. Copyright ©Houghton Mifflin Company. All rights reserved.

Your Next Five Years 2. Consider using a high-deductible health care plan and health savings account if you are unable to afford the high costs of an HMO or traditional health insurance plan. 3. Always maintain coverage for direct health care expenses when changing employers using the COBRA law or a short-term health plan for protection. Copyright ©Houghton Mifflin Company. All rights reserved.

Your Next Five Years 4. Take advantage of employer-sponsored long-term disability income insurance if available or consider purchasing protection individually. 5. Regularly reevaluate your need for long-term care insurance against your resources for providing such care on your own. Copyright ©Houghton Mifflin Company. All rights reserved.

Learning Objective #1 Identify ways that people can manage the financial burdens resulting from illness or injury. Copyright ©Houghton Mifflin Company. All rights reserved.

Addressing the Financial Burdens of Illness or Injury Group Health Plans are sold or provided collectively to an entire group of people rather than to individuals. Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 7

Addressing the Financial Burdens of Illness or Injury Covering Your Direct Medical Care Costs Health Maintenance Organizations (HMOs) Traditional Health Insurance High-deductible Plans Medicaid, Medicare Parts A and B Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 8

Addressing the Financial Burdens of Illness or Injury Covering Your Rehabilitative and Custodial Care Costs Long-term care insurance Covering Your Lost Income Disability Income Insurance Social Security disability income insurance Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 9

Concept Check 11.1 List three ways that group health plans are better than individually purchased plans. Identify the five mechanisms available to help people pay for direct health care costs. Copyright ©Houghton Mifflin Company. All rights reserved.

Concept Check 11.1 Explain why someone might want to purchase long-term care insurance. Explain how someone might replace the income lost due to illness or injury. Copyright ©Houghton Mifflin Company. All rights reserved.

Learning Objective #2 Distinguish among the types of protection for direct health expenses. Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 12

Sources of Protection from Direct Medical Care Costs Health Care Plans Changes to your group plan can be made during the open-enrollment period. Copyright ©Houghton Mifflin Company. All rights reserved.

Sources of Protection from Direct Medical Care Costs Health Maintenance Organizations Individual Practice Organization HMOs, Managed Care Plans Primary-Care Physician Copyright ©Houghton Mifflin Company. All rights reserved.

Traditional Health Insurance Comprehensive Health Insurance Indemnity Plans Preferred Provider Organizations Copyright ©Houghton Mifflin Company. All rights reserved.

Consumer-Driven Health Care High-Deductible Health Care Plan Health Savings Account (or HSA) Health Reimbursement Account (or HRA) Copyright ©Houghton Mifflin Company. All rights reserved.

Concept Check 11.2 Distinguish between health maintenance organizations (HMOs) and traditional health insurance. Identify two benefits of selecting a preferred provider organization (PPO) when seeking health care. Copyright ©Houghton Mifflin Company. All rights reserved.

Concept Check 11.2 Explain the linkage between high-deductible health care plans and health savings accounts (HSAs) and health reimbursement accounts (HRAs). Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 18

Learning Objective #3 Describe the general benefits and limitations of health care plans. Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 19

Making Sense of Your Health Plan Benefits Certificate of Insurance: Paper or booklet that outlines group health insurance benefits. Copyright ©Houghton Mifflin Company. All rights reserved.

Making Sense of Your Health Plan Benefits What Types of Care Are Covered? Dental expense insurance Vision care insurance Preexisting conditions Copyright ©Houghton Mifflin Company. All rights reserved.

Making Sense of Your Health Plan Benefits Who Is Covered When does coverage begin and end? Optionally renewable policies Guaranteed renewable policies Noncancelable policies Copyright ©Houghton Mifflin Company. All rights reserved.

Making Sense of Your Health Plan Benefits How Much Must Your Pay Out of Your Own Pocket? Deductibles Copayments Coinsurance Copyright ©Houghton Mifflin Company. All rights reserved.

Lifetime or aggregate limit Policy Limits Item limits Episode limits Annual limits Lifetime or aggregate limit Copyright ©Houghton Mifflin Company. All rights reserved.

Coordination of Benefits Coordination of benefits clause Maintain your medical care plan between jobs. COBRA rights Portability option Copyright ©Houghton Mifflin Company. All rights reserved.

Concept Check 11.3 What are preexisting conditions and how do they affect coverage under health plans? Distinguish among a deductible, a copayment, and coinsurance. Explain COBRA rights and portability rights that apply when you leave a job that has a group health care plan. Copyright ©Houghton Mifflin Company. All rights reserved.

Concept Check 11.3 Distinguish among item limits, episode limits, time period limits, and aggregate limits as used in health care plans. Distinguish among optionally renewable, guaranteed renewable, and noncancelable health care plans. List three ways you can save on taxes when paying for health care or insurance. Copyright ©Houghton Mifflin Company. All rights reserved.

Learning Objective #4 Develop a plan for protecting your income when you cannot work due to disability. Copyright ©Houghton Mifflin Company. All rights reserved.

Protecting Your Income During Disability Disability income insurance Social Security disability insurance Copyright ©Houghton Mifflin Company. All rights reserved.

Protecting Your Income During Disability Important disability income insurance policy provisions: Waiting period (or elimination period) Benefit period A longer waiting period will help you afford a longer benefit period. Copyright ©Houghton Mifflin Company. All rights reserved.

Protecting Your Income During Disability Important disability income insurance policy provisions: Degree of disability Own-occupation or any-occupation Split-definition policies Residual clause Social Security rider Cost-of-living adjustments Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 31

Concept Check 11.4 Explain how you determine your level of need for disability income insurance. Identify the major policy provisions to consider when purchasing disability income insurance. Copyright ©Houghton Mifflin Company. All rights reserved.

Concept Check 11.4 Distinguish between any-occupation and own-occupation disability income insurance plans. Describe how you might adjust the waiting period on a disability income insurance policy in order to affordably obtain a longer benefit period. Copyright ©Houghton Mifflin Company. All rights reserved.

Learning Objective #5 Explain how to protect yourself from the expenses for long-term care. Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 34

Planning for Long-Term Care The degree of impairment required for benefits to begin Activities of Daily Living (ADLs) The level of care covered Skilled nursing care Intermediate care Custodial care Copyright ©Houghton Mifflin Company. All rights reserved.

Planning for Long-Term Care The person’s age The benefit amount The benefit period The waiting period Inflation protection Copyright ©Houghton Mifflin Company. All rights reserved.

Concept Check 11.5 Describe the protections provided by long-term care insurance. Distinguish between the benefit period and the waiting period for a long-term care policy. List three aspects of long-term care insurance that affect the cost of a policy. Copyright ©Houghton Mifflin Company. All rights reserved.

The Top 3 Financial Missteps In Managing Health Expenses People slip up in managing health expenses when they do the following: 1. Go unprotected for health care when changing jobs. Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 38 38

The Top 3 Financial Missteps In Managing Health Expenses 2. Duplicate employer-provided health care protection with your employed spouse. 3. Ignore the need for disability income insurance. Copyright ©Houghton Mifflin Company. All rights reserved. 11 - 39 39

Do It NOW! Maintaining coverage in a health care plan is essential to protect your future financial success. Start today by: 1. Learning exactly what group health care coverage you actually do have through your job, your school, and/or your parents. Copyright ©Houghton Mifflin Company. All rights reserved.

Do It NOW! 2. Investigating the possibility of saving on income taxes via a premium conversion plan, flexible spending arrangement, or health savings account (HSA). 3. Identifying one behavior that you engage in that could lead to health problems later in life and taking steps to reduce their impact. Copyright ©Houghton Mifflin Company. All rights reserved.