CHAPTER 14 HEALTH DISABILITY AND LIFE INSURANCE CHAPTER

CHAPTER 14 HEALTH, DISABILITY, AND LIFE INSURANCE

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • I. HEALTH INSURANCE • A. WHAT IS HEALTH INSURANCE? • IT IS COVERAGE TO PAY FOR SOME OR ALL OF YOUR MEDICAL EXPENSES. • B. HOW DO YOU GET HEALTH INSURANCE? • 1. GROUP HEALTH INSURANCE • TYPICALLY EMPLOYER SPONSORED • FEDERAL LAW ALLOWS FOR COVERAGE IF LOSS OF JOB OR CHANGING JOBS FOR A PERIOD OF TIME (COBRA) • COSTS TEND TO BE LOWER BECAUSE OF THE LARGE NUMBER OF PEOPLE IN THE GROUP • 2. INDIVIDUAL HEALTH INSURANCE • CAN BUY DIRECTLY FROM THE INSURANCE COMPANY • CAN BUY ON THE MARKETPLACE/EXCHANGE • BE SURE TO COMPARISON SHOP – PRICES CAN VARY WILDLY BETWEEN PROVIDERS

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 3. COBRA • AN EMPLOYEE CAN KEEP FORMER INSURANCE FOR A TIME (9 MONTHS USUALLY) • HAVE TO PAY PREMIUMS YOURSELF (EVEN IF EMPLOYER DID PREVIOUSLY) • HAVE TO WORK FOR A PRIVATE COMPANY OR STATE/LOCAL GOVERNMENT • 4. UNDER CURRENT LAW, YOU ARE REQUIRED TO HAVE INSURANCE IN 2018 (THE LAW HAS BEEN REPEALED STARTING IN 2019) • IF YOU WERE UNINSURED FOR LESS THAN 3 MONTHS, YOU ARE STILL CONSIDERED “COVERED” • RESPONSIBILITY FEES • UP TO $2, 085 PER HOUSEHOLD • OR 2. 5% OF ANNUAL INCOME (UP TO COST OF BRONZE PLAN) • GREATER OF THE TWO

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • MINIMUM ESSENTIAL COVERAGE – WHAT QUALIFIES AS A QUALIFIED PLAN • 1. AFFORDABILITY • MUST COVER AT LEAST 60% OF OUT OF POCKET COSTS • MAXIMUM OUT OF POCKET OF $7, 150/SINGLE OR $14, 300/FAMILY • DEDUCTIBLES COUNT – PREMIUMS DO NOT • 2. GUARANTEED AVAILABILITY • AS LONG AS YOU CAN PAY, YOU HAVE COVERAGE • 3. GUARANTEED RENEWAL • CAN RENEW POLICY REGARDLESS OF HEALTH STATUS • 4. FAIR HEALTH INSURANCE PREMIUMS • LIMITS THE CHARGES BASED ONLY ON AGE, TOBACCO USE, FAMILY SIZE, AND GEOGRAPHY • 5. MEDICAL LOSS RATIO • IF THE INSURANCE COMPANY SPENDS LESS THAN 80% OF THE PREMIUMS RECEIVED, THEY MUST GIVE A REBATE TO POLICYHOLDERS

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 6. MUST PROVIDE 10 ESSENTIAL BENEFITS • 1. AMBULANCE SERVICES • 2. EMERGENCY SERVICES • 3. HOSPITALIZATION • 4. MATERNITY & NEWBORN CARE • 5. MENTAL HEALTH & SUBSTANCE ABUSE • 6. PRESCRIPTION DRUG • 7. REHABILITATIVE & HABILITATIVE SERVICES • 8. LABORATORY SERVICES • 9. PREVENTATIVE & WELLNESS SERVICES • 10. PEDIATRIC SERVICES (INCLUDING ORAL AND VISION) • 7. NO ANNUAL OR LIFETIME LIMITS ON ESSENTIAL BENEFITS • 8. COVERAGE FROM AN EMPLOYER MUST BE AFFORDABLE, MEANING THAT YOU COULD BUY SIMILAR COVERAGE ON THE OPEN MARKET FOR LESS THAN WHAT THEY OFFER

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • B. TYPES OF HEALTH INSURANCE COVERAGE • MOST PLANS HAVE DEDUCTIBLES, WHICH IF MONEY YOU MUST PAY BEFORE INSURANCE WILL PAY FOR ANYTHING • THEY MAY ALSO HAVE CO-PAYS, WHICH ARE SPECIFIC AMOUNTS YOU PAY FOR SPECIFIC SERVICES • EX. $20 FOR DOCTORS VISIT, $150 FOR EMERGENCY ROOM VISIT • 1. BASIC HEALTH COVERAGE • A. HOSPITAL EXPENSES • COVERS COST OF ROOM & BOARD AT THE HOSPITAL • ANESTHESIA, X-RAYS, OPERATING ROOM, ETC. • B. SURGICAL EXPENSES • PAYS SURGEONS FEES • C. PHYSICAL EXPENSES • COVERS NON-SURGICAL EXPENSES • LAB TESTS, DOCTOR’S VISITS, ETC.

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 2. MAJOR MEDICAL EXPENSE • A. COVERS ALMOST ALL MAJOR MEDICAL EXPENSES • B. MANY PLANS HAVE CO-INSURANCE • CO-INSURANCE IS WHERE THE POLICY HOLDER WILL PAY A PORTION OF THE BILL (AFTER DEDUCTIBLE AND CO-PAYS) • 80/20 IS TYPICAL – INSURANCE WILL PAY 80% OF BILL, INSURED WILL PAY 20% UP UNTIL THE INSURED HITS THE OUT-OF-POCKET MAXIMUM – WHICH IS THE MOST YOU CAN PAY ON A PLAN • ADJUSTING ANY OF THESE 3, DEDUCTIBLE, CO-PAYS, OR CO-INSURANCE CAN AFFECT THE COST OF THE PLAN • THE MORE RISK YOU TAKE, THE LOWER THE COST • 3. COMPREHENSIVE MAJOR MEDICAL • INSURANCE THAT COVERS JUST ABOUT EVERYTHING AND ANYTHING • VERY EXPENSIVE

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 4. OTHER “INSURANCE” PLANS • 1. HOSPITAL INDEMNITY POLICIES • PAYS CASH WHEN YOU ARE INJURED (TO PAY FOR MEDICAL EXPENSES) • AFLAC IS A MAJOR PROVIDER OF THIS • TYPICALLY NOT WORTH THE COST • 2. DENTAL COVERAGE • PAYS FOR DENTAL COVERAGE • CHECKUPS, X-RAYS, CAVITIES, ROOT CANALS, ETC… • 3. VISION CARE INSURANCE • PAYS FOR VISION SERVICES • EXAM, GLASSES, FRAMES, CONTACTS, ETC… • 4. DREAD DISEASE COVERAGE • SPECIFIC COVERAGE FOR SPECIFIC DISEASES, LIKE CANCER • ALREADY COVERED BY YOUR INSURANCE, SO YOU’RE “DOUBLE INSURED” • BAD IDEA – NOT WORTH THE COST

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 5. LONG TERM COVERAGE • COVERS YOU FOR IN-HOME OR NURSING HOME COVERAGE • CAN BE A VERY GOOD DEAL IF PURCHASED IN ADVANCE, BUT YOU JUST NEVER KNOW • C. MAJOR PROVISIONS IN A HEALTH INSURANCE POLICY • 1. ELIGIBILITY – WHO IS COVERED BY THIS INSURANCE PLAN • 2. BENEFITS – WHAT DOES THE INSURANCE COVER? • 3. CO-PAYMENTS – WHAT ARE YOU CHARGED FOR SPECIFIC SERVICES? • 4. EXCLUSIONS & LIMITATIONS – WHAT IS NOT COVERED • 5. RENEWABILITY – REQUIRED BY CURRENT LAW • 6. CANCELLATION & TERMINATION – BY CURRENT LAW CAN ONLY BE DONE IF YOU DON’T PAY • INSURANCE COMPANIES USED TO BE ABLE TO DROP YOUR COVERAGE IF YOU GOT “TOO SICK” • D. HOW DO YOU CHOOSE YOUR COVERAGE • EVALUATE THE COST OF THE PREMIUMS, THE MAX OUT-OF-POCKET COSTS, THE COPAYS, AND FIGURE OUT HOW MUCH RISK YOU ARE WILLING TO TAKE.

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • II. PRIVATE & GOVERNMENT INSURANCE PLANS • A. PRIVATE HEALTH CARE INSURANCE PLANS • 1. HOSPITAL & MEDICAL SERVICE PLANS • BLUE CROSS & BLUE SHIELD • BLUE CROSS = HOSPITAL BENEFITS • BLUE SHIELD = SURGICAL AND MEDICAL COVERAGE • STATEWIDE ORGANIZATIONS TO PROVIDE COVERAGE AND MANAGE COSTS • 2. MANAGED CARE PLANS • PREPAID HEALTH PLANS THAT PROVIDE COMPREHENSIVE COVERAGE • CONTROL THE COST OF HEALTH CARE BY CONTROLLING HOW IT’S USED

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 3. HEALTH MAINTENANCE ORGANIZATIONS (HMOS) • PLAN DIRECTLY EMPLOYS OR CONTRACTS WITH SELECTED PHYSICIANS • TYPICALLY CHEAPER THAN OTHER OPTIONS • YOU MUST USE NETWORK DOCTORS AND FACILITIES • OUT OF NETWORK VISITS WILL NOT BE COVERED (OR WILL BE SIGNIFICANTLY MORE EXPENSIVE) • YOU ARE REQUIRED TO CHOOSE A PRIMARY DOCTOR AND MUST GET PREAPPROVAL TO SEE ANY SPECIALIST • PLAN RESTRICTS YOUR USE, WHICH IS WHY IT IS CHEAPER • 4. PREFERRED PROVIDER ORGANIZATION (PPOS) • A GROUP OF DOCTORS, PHYSICIANS, AND HOSPITALS THAT PROVIDE SPECIFIC MEDICAL SERVICES FOR SPECIFIC COSTS • TYPICALLY HAVE LOWER DEDUCTIBLES, BUT HAVE CO-PAYS • YOU ARE ALLOWED TO GO OUT-OF-NETWORK, BUT THE DEDUCTIBLES AND CO-PAYS ARE USUALLY HIGHER • YOU HAVE MORE FLEXIBILITY TO SEE DOCTORS, SO THE PLANS ARE USUALLY MORE EXPENSIVE THAN HMOS

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 5. HEALTH SAVINGS ACCOUNT (HSA) • CAN BE SIMILAR TO A PPO OR AN HMO (MOST ARE PPO THOUGH) • REQUIRES THE USE OF A HIGH-DEDUCTIBLE INSURANCE PLAN • $1, 350 FOR A SINGLE OR $2, 700 FOR A FAMILY • YOU ARE ALLOWED TO CONTRIBUTE, PRE TAX, UP TO $3, 450 FOR A SINGLE, OR $6, 850 A YEAR TO A HSA ACCOUNT • THIS ACCOUNT CAN BE USED TO PAY FOR ANY QUALIFIED MEDICAL EXPENSE • INCLUDES MEDICAL CARE, DENTAL CARE, VISION CARE, MEDICATIONS (PRESCRIPTION AND OTC), AND OTHER THINGS THAT AREN’T COVERED BY MEDICAL INSURANCE, SUCH AS LASIK. • IT IS YOURS TO KEEP AND USE FOREVER! • EARNS TAX DEFERRED INTEREST – AND AS LONG AS YOU USE FOR MEDICAL EXPENSES YOU WILL NEVER PAY TAXES ON IT • CAN ALLOW YOU TO SAVE BETWEEN 20 -40% ON YOUR MEDICAL EXPENSES BECAUSE YOU ARE USING PRE-TAX DOLLARS, RATHER THAN AFTER-TAX DOLLARS

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • B. GOVERNMENT HEALTH CARE PROGRAMS • 1. MEDICARE – FEDERAL • PROVIDES COVERAGE TO ELDERLY AND CERTAIN DISABLED PERSONS • TWO PARTS TO MEDICARE • PART A – HOSPITAL COVERAGE • PART B – MEDICAL COVERAGE • CAN PURCHASE PART D – PRESCRIPTION DRUG COVERAGE FOR ADDITIONAL COST • MEDICARE DOES NOT COVER • SKILLED OR LONG TERM NURSING CARE • OUT-OF-HOSPITAL PRESCRIPTION DRUGS • ROUTINE CHECKUPS • DENTAL COVERAGE • MEDIGAP INSURANCE CAN FILL-IN SOME OF THESE GAPS THAT ARE NOT COVERED (BUT YOU DON’T NEED FULL MEDICAL COVERAGE, AS MEDICARE COVERS A LOT OF YOUR REQUIREMENTS)

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 2. MEDICAID – STATE • PROVIDES HEALTH CARE COVERAGE TO CHILDREN AND OTHER LOW-INCOME INDIVIDUALS • COVERS MANY OF THE SAME THINGS THAT A PRIVATE INSURANCE PLAN WOULD COVER FOR THESE INDIVIDUALS • IS COMPREHENSIVE COVERAGE • III. DISABILITY INSURANCE • A. DISABILITY INCOME • 1. PROVIDES REGULAR CASH PAYMENTS IF UNABLE TO WORK DUE TO • PREGNANCY • NON-WORK RELATED INJURY • ILLNESS (LONG TERM) • 2. THE DEFINITION OF A DISABILITY WILL VARY FROM COMPANY TO COMPANY • 3. BEING DISABLED CAN CAUSE A GREATER FINANCIAL BURDEN THAN THE DEATH OF A WAGE EARNER • NOT ONLY WILL WAGES BE LOST, BUT USUALLY AN INCREASE IN MEDICAL BILLS, AND STILL HAVE TO PAY LIVING EXPENSES

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • B. SOURCES OF DISABILITY INCOME • 1. WORKMEN’S COMPENSATION • IF A RESULT OF INJURY OR ILLNESS ON THE JOB (NOT CAUSED BY YOUR NEGLIGENCE) • WILL DEPEND ON YOUR WORK HISTORY AND SALARY • 2. EMPLOYER • EMPLOYER PAID COMPENSATION (DISABILITY INSURANCE) • AND ACCRUED PAID TIME OFF MAY BE USED FIRST (VACATION DAYS, SICK DAYS, ETC…) • 3. SOCIAL SECURITY • VERY STRICT RULES TO QUALIFY FOR SOCIAL SECURITY DISABILITY • MUST BE OUT OF WORK FOR AT LEAST 12 MONTHS, OR HAVE A RISK TO YOUR LIFE • 4. PRIVATE PLANS • SELF PURCHASED FROM AN INSURANCE COMPANY • GENERALLY EXPENSIVE

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • C. DISABILITY INSURANCE TRADE-OFFS • 1. WAITING OR ELIMINATION PERIOD • HOW LONG MUST YOU WAIT UNTIL BENEFITS ARE PAID TO YOU • USUALLY 30, 90, OR 180 DAYS ARE STANDARD • LONGER ELIMINATION PERIOD = LOWER COST • 2. DURATION OF BENEFITS • HOW LONG WILL BENEFITS BE PAID TO YOU? • SHOULD BE PAID FOR LIFE, IF POSSIBLE (BUT MORE EXPENSIVE) • 3. AMOUNT OF BENEFITS • AIM TO REPLACE BETWEEN 60 -70% OF YOUR INCOME • 4. GUARANTEED RENEWABILITY • 5. OCCUPATIONAL VERSUS OWN-OCCUPATIONAL • IF YOUR DISABILITY PREVENTS YOU FROM DOING YOUR JOB, OWN-OCCUPATIONAL WILL ONLY PAY FOR A SHOT TIME, AS LONG AS YOU COULD DO ANOTHER JOB • IF YOU ARE TOTALLY DISABLED AND UNABLE TO WORK ANY JOB, WILL PAY FOR LIFE.

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • IV. LIFE INSURANCE • A. WHAT IS LIFE INSURANCE? • 1. A POLICY WHERE THE INSURANCE COMPANY PAYS A DEATH BENEFIT UPON THE POLICYHOLDER’S DEATH • 2. PURPOSE OF LIFE INSURANCE • PAY OFF MAJOR DEBTS (HOME, CREDIT CARDS) • PROVIDE LUMP SUM PAYMENT TO CHILDREN/OTHER BENEFICIARIES • PROVIDE RETIREMENT INCOME • PAY ESTATE AND DEATH TAXES • PROVIDE INCOME TO SURVIVORS TO MAINTAIN STANDARD OF LIVING • 3. THE COST VARIES WITH AGE, IF YOU ARE YOUNGER, IT’S CHEAPER, AS YOU’RE LESS LIKELY TO DIE • 4. DO YOU NEED LIFE INSURANCE? • IF YOUR DEATH WOULD CAUSE A FINANCIAL HARDSHIP TO SURVIVORS YOU SHOULD HAVE INSURANCE • AIM FOR 10 -20 TIMES YOUR ANNUAL INCOME (MAKE 40 K A YEAR, GET A 400 -800 K LIFE INSURANCE POLICY) IF YOU HAVE CHILDREN • IF YOU ARE SINGLE, ENOUGH TO COVER YOUR FINAL EXPENSES (BURIAL, SERVICE, ETC… (1020 K) • IF YOU ARE RETIRED, WITH NO CHILDREN, YOUR RETIREMENT ACCOUNT SHOULD COVER THIS!

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • B. TYPES OF LIFE INSURANCE • 1. TERM LIFE INSURANCE • COVERS YOU FOR A SPECIFIED AMOUNT OF TIME (BETWEEN 5 -30 YEARS) OR TO A SPECIFIC AGE • LOWEST COST • TYPES OF TERM LIFE INSURANCE • RENEWABLE TERM • CAN RENEW YEAR AFTER YEAR • PREMIUMS WILL INCREASE AS YOU AGE (YOU’RE MORE LIKELY TO DIE AS YOU GET OLDER) • LEVEL TERM • PREMIUMS ARE THE SAME FOR THE ENTIRE TERM • CONVERSION TERM • CAN CONVERT TO A PERMANENT PLAN – EXPENSIVE • DECREASING TERM • COVERAGE DECREASES OVER TIME (USUALLY USED FOR PAYING OFF EXPENSES)

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 2. WHOLE LIFE INSURANCE (UNIVERSAL LIFE) • PERMANENT POLICY (YOU HAVE IT FOR LIFE) • HAS A CASH VALUE – LIKE A SAVINGS ACCOUNT • FROM A FINANCIAL STANDPOINT, YOU ARE MUCH BETTER USING A COMBINATION OF A TERM LIFE INSURANCE PLAN AND A ROTH IRA, THAN BUYING A WHOLE LIFE INSURANCE POLICY • HTTPS: //WWW. YOUTUBE. COM/WATCH? V=VMUPWFBSNMA • 3. OTHER TYPES • GROUP LIFE – OFFERED THROUGH EMPLOYMENT – USUALLY CHEAPER • CREDIT LIFE – PAYS OFF SPECIFIC DEBTS – BAD AND EXPENSIVE • ENDOWMENT LIFE – COVERS FOR A CERTAIN TIME AND PAYS A BENEFIT IF YOU’RE STILL ALIVE AT THAT TIME • B. KEY PROVISIONS • A. BENEFICIARY • WHO GETS THE MONEY IF YOU DIE? • MAY NEED A SECONDARY BENEFICIARY IN CASE PRIMARY DIES FIRST (OR AT SAME TIME) • NEED TO KEEP UP TO DATE AS YOUR LIFE SITUATION CHANGES

CHAPTER 14 – HEALTH, DISABILITY, AND LIFE INSURANCE • 2. INCONTESTABILITY CLAUSE • INSURER CAN’T CANCEL POLICY IF ITS BEEN ENFORCED FOR A WHILE (AS LONG AS YOU PAY) • 3. SUICIDE CLAUSE • MAY NOT PAY AT ALL, OR ONLY PAY BACK PREMIUMS IF THE DEATH WAS DUE TO SUICIDE • 4. ADDITIONAL “RIDERS” TO LIFE INSURANCE POLICIES • WAIVER OF PREMIUM DISABILITY • IF DISABLED, NO LONGER HAVE TO PAY PREMIUMS • ACCIDENTAL DEATH • PAYS DOUBLE IF THE DEATH IS DUE TO AN ACCIDENT • NOT WORTH COST! • GUARANTEED INSURABILITY • CAN BUY ADDITIONAL COVERAGE WITHOUT UNDERGOING A MEDICAL EXAM • COST OF LIVING EXPENSES PROTECTION • AMOUNT WILL ADJUST OVER TIME, SO NO LOSS OF PURCHASING POWER