Managing

health
expenses
WANGON, CRISTALYN C.
BERNALES, ELIZABETH N.
JIMENEZ, ERICKA MAE G.
LACAMBRA, KRESSIA C.
LERIDA, JAMAICA
LOPER, ELLAINE N.
RESARE, PRINCESS O.
SOLAR, CRISTINE JOY
SY, IAHNA MARSELLE
 InTended learning 2

outcome
✖ Identify ways that people can manage the financial burdens resulting from illness
or injury.

✖ Distinguish among the types of protection for direct health expenses.

✖ Describe the general benefits and limitations of health care plans.

✖ Develop a plan for protecting your income when you cannot work due to
disability.

✖ Explain how to protect yourself from the expenses for long-term care.
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Introduction
Possible financial issues:

1. The direct costs of the required health care.

2. The cost of your rehabilitation and custodial care.

3. The income lost.

 FINANCIAL BURDENS OF
4

ILLNESS OR INJURY
✖ Group Health Plan

- sold collectively to an entire group of people rather than to

individuals, such as the group health care policies offered by
employers.
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1. COVERING YOUR DIRECT

HEALTH CARE COST
✖ Medicare

- The federal government’s health care program

for the elderly.
- Medicare Part A
- Medicare Part B
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✖ Medicaid

- A government health care plan program for low-

income people funded jointly by the federal and
state governments.
- S-CHIP Program covers children whose parents
are middle income but do not have access to a
private health care plan.
 2. COVERING YOUR 7

REHABILATIVE AND CUSTODIAL

CARE COST
✖ Long-term insurance

- Provides reimbursement for costs associated

with custodial care in nursing facility or at home.
 3. COVERING YOUR LOST 8

INCOME
✖ Disability Income Insurance- Insurance that covers a
portion of the income lost when you cannot work because
of illness or injury.
 short-term disability income insurance plan
 long-term disability income insurance plan

✖ Social Security Disability Income Insurance- Under this

government program, eligible workers can collect some
income for up to one year if their disabilities are total,
meaning that they cannot work at any job.
9
 Sources of Protection from Direct 10

Health Care Costs

✖ Health Care Plan- Generic name for any program that
pays or provides reimbursement for direct health care
expenditures.

✖ Health Maintenance Organizations- Health insurance

plans that provide a broad range of health care services
for a set monthly fee on a prepaid basis.
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✖ HMOs Provide Prepaid Health Care- The monthly fee

charged by an HMO is actually a prepayment for your
health care. The fee is based on the health services that
the average plan member would tend to use. HMOs do
not put dollar limits on how much health care can be used.
Instead, they list the types of health care they will provide
under the contract.
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How HMOs Work

✖ HMO subscribers are assigned a primary-care physician by the
HMO or choose one from a list of physicians employed by the
HMO.

✖ HMOs are one of several types of managed care plans.

✖ One HMO variation is the individual practice organization (IPO).

 Traditional Health 13

Insurance
✖ Health insurance provides protection against direct
medical expenses resulting from illness and injury.

✖ These coverages can be purchased separately, but most

consumers and employers prefer comprehensive health
insurance because it combines these protections into a
single policy with policy limits of $1 million or more
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✖ Health insurance plans are often referred to as

indemnity plans or fee-for-service plans.

✖ Health insurance plans often identify a preferred

provider organization (PPO).

✖ A provider-sponsored network (PSN), also called a

provider sponsored association.
 CONSUMER-DRIVE 15

HEALTH CARE
✖ Consumer-driven health care

- An approach to health care protection where the

consumer elects a health care plan with a high
deductible and high overall policy limits.
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✖ High-deductible health care plan

- Can either be traditional health insurance or an

HMO that follows the consumer-driven health care
philosophy by charging relatively high deductibles.
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✖ Health Savings Account (HSA)

- Tax-deductible savings accounts into which

individuals or employers can deposit tax-sheltered
funds to pay medical bills.
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✖ Health Reimbursement Account (HRA)

- Funds that employers set aside to reimburse

employees for qualified health expenses.
MAKING SENSE 19

OF YOUR
HEALTH PLAN
BENEFITS
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✖ You can save yourself considerable confusion, delay, and

money if you understand your health plan benefits before
illness or injury strikes.

✖ If you have a group plan, you will receive a certificate of

insurance that outlines your benefits.

✖ If you have purchased a plan on your own, you should

become familiar with your health insurance policy or your
HMO contract.
 WHAT TYPES OF 21

CARE ARE COVERED?

✖ The typical health care plan covers hospital room and
board expenses, surgical procedures both as an
inpatient and outpatient, prescription drugs,
diagnostic tests, visit’s to the doctor’s office, and many
other aspects of health care.
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✖ DENTAL EXPENSE INSURANCE

- Dental and vision care are generally not covered.

- You can buy separate dental expense insurance

(possibly as a group plan through your employer) to
provide reimbursement for dental care expenses.
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✖ VISION CARE INSURANCE

- Provides reimbursement for eye examinations and

purchase of glasses and contact lenses.

- Vision care insurance typically written on a group

basis as an employee benefit.
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WHO IS COVERED?
✖ Health care plans can be written to cover an individual, a
family, or a group.

✖ Few misunderstandings arise when an individual is the

focus of the coverage, but family policies can be more
complex.

✖ Spouse, and Children of the Insured person, domestic

partners, stepchildren, noncustodial children.
 COVERAGE BEGIN 25

AND END?
✖ An annual plan beginning January 1 will start at 12:00
a.m. that day and end at 11:59 p.m. on December 31.
✖ Any illness that begins during the year will be covered.
✖ But will coverage continue if the plan expires while you
are in the hospital?
✖ Health care plans must be renewed each year.
✖ Renewal of individual plan is handled in one of three ways. 26

✖ Optionally renewable policies may be canceled or changed

by the plan provider but only at the time of expiration and
renewal, often with 30 days’ notice.
✖ Guaranteed renewable policies must be continued in force
as long as the policy holder pays the required premium.
✖ Noncancelable policies must be continued in force without
premium changes up to age 65 as long as the participant
pays the required premium.
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How much must

you pay out of your
own pocket?
Health care plans contains provisions that specify the level of
payments for covered expenses.
✖ Deductibles 28

- Clauses in health care plans that require you to pay an initial

portion of medical expenses annually before receiving
reimbursement.

✖ Copayment
- Variation of a deductible requires you to pay a specific dollar
amount each time you use your benefits for a specific covered
expense item.

✖ Coinsurance clause
- Requires insured to pay a proportion of any loss suffered.
 29

✖ Example: $40,000 loss on a $200,000 home

• Home worth $200,000 but only covered for $150,000

• $200,000 * 80% = $160,000 – Insufficient coverage!

 The homeowner was not in compliance
 The home was “underinsured”

• The insurance company will only pay…

 $40,000 loss * ($150,000 / $200,000) = $30,000
 The homeowner must pay the extra $10,000
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✖ Policy limits
- Policy limits specify the maximum dollar amounts that a
health insurance plan will pay to reimburse a covered loss.
✖ Item limits
- specify the maximum reimbursement for a particular health
care expense.

Example: Karl policy contains a $75 maximum per X-ray. He suffered a heart
attack and had X-ray expenses of $840.
* 7 x 120= $840 ….. The policy will pay 7 x $75= $525 of this expense. Karl
must pay the remaining $315.
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✖ Episode limits
- specify the maximum payment for health care expenses
arising from a single episode of illness or injury, with each
episode being considered separately.
✖ Example One: Example Two:
● Patient - $50 Patient - $450
● Insurance - $550 Insurance - $550
● Reimbursement - $600 Reimbursement - $1000
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✖ Annual Limits – specify the maximum payment for
covered expenses occurring within one year.
For example:

Lifetime or Aggregate limit – places an overall maximum on

the total amount of reimbursement available under a policy.
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✖ Coordination-of-benefits clause- prevents individual

from collecting insurance benefits that exceed the loss
suffered.

✖ Premium Conversion Plans – the employee’s share of

the premiums is paid with pretax.

✖ Flexible Spending Arrangements – it is an employer

arrangement that allow employees to place a portion of
their salary into an account.
 ADVICE FROM A PRO: 34

Maintain Your Health

Care Plan Between Jobs
✖ You can assert your COBRA rights (Consolidated
Omnibus Budget Reconciliation Act of 1995). These rules
allow you to remain a member of a group health plan as
long as 18 months of you worked for an employer with
more than 20 workers.
 INCOME DURING 35

DISABILITY
✖ A number of resources are available for income
protection during a period of disability, but disability
income insurance is probably the most overlooked type
of insurance.

“A young person with no dependents might have a greater

need for disability insurance than life insurance.”
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✖ There are three kinds of disability determined by GSIS based

on established medical standards.

a. Permanent Total Disability

b. Permanent Partial Disability
c. Temporary Total Disability
IMPORTANT DISABILITY 37

INCOME INSURANCE
POLICY PROVISIONS
✖ Waiting Period
✖ Benefit Period
✖ Degree of Disability
✖ Social Security Rider
✖ Cost-of-Living Adjustments
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✖ Waiting period

- it is the time period between the onset of the

disability and the date that disability benefits
begin.
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✖ Benefit Period

- Is the maximum period of time for which

benefits will be paid. It begins when the
elimination period ends.
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✖ Degree of Disability

- Own-occupation policy – provide benefits if you can

no longer perform the occupation you had at the time
you became disabled.

- Any-occupation policy – provide full benefits if you

cannot perform any occupation.
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- Split-definition policy – are likely to provide benefits for

rehabilitation and restraining at insurance company
expense.

- Residual clause – is a feature of own-occupation policies

that allows for some reduced level of disability income
benefits when a partial-rather than full-disability occurs.
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✖ Social Security Rider

- Provides an extra dollar amount of protection if a

person fails to qualify for Social Security disability
benefits.

✖ Cost of Living Adjustments

- A policy with a cost-of-living clause, which will

increase your benefit amount to keep up with inflation.
 Planning for Long Term Care 43

Factors when considering a long

term care policy:
1. The degree of impairment required for benefits to
begin.

- Insurance companies use the inability to perform a

certain number of activities of daily living (ADLs) as a
criterion for deciding when the insured becomes eligible
for long-term care benefits.
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2. . The level of care covered.

- Skilled nursing care is intended for people who need

intensive care, meaning 24-hour-a-day supervision and
treatment by a registered nurse, under the direction of a
doctor.

- Intermediate care is appropriate for people who do not require

around-the-clock nursing but who are not able to live alone.
Custodial care is suitable for many people who do not need
skilled nursing care but who nevertheless require supervision.
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3. The person’s age.

- The younger the person when the policy is

purchased, the lower the premium as the odds of
needing care increase with age.
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4. The benefit amount.

- Long-term care plans are generally written to

provide a specific dollar benefit per day of
care.
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5. The benefit period.

- It is possible to buy a policy with lifetime

benefits, this option can be very expensive.
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6. The waiting period.

- Policies can pay benefits from the first day of

nursing homecare or they can include a
waiting period.
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7. Inflation protection.

- If a policy is purchased prior to age 60, the

buyer faces a significant risk in that inflation
may render the daily benefit woefully
inadequate when care is ultimately needed.
Thank 50

you!
.