Chapter 15 Health-Care Reform; Individual Health Insurance Coverages Agenda • • • • • • • • • Health-Care Problems in the US Health-Care Reform Basic Provisions of the Affordable Care Act Individual Medical Expense Insurance Individual Medical Expense Insurance and Managed Care Plans Health Savings Accounts Long-term Care Insurance Disability-Income Insurance Individual Health Insurance Contractual Provisions Copyright ©2014 Pearson Education, Inc All rights reserved 15-2 Health-Care Problems in the US • The US Health-care delivery system has four major problems: – – – – – – Rising health-care expenditures Large number of uninsured in the population Uneven quality of medical care Considerable waste and inefficiency Defects in financing health care Abusive insurer practices Copyright ©2014 Pearson Education, Inc All rights reserved 15-3 Health-Care Problems in the US • Problem 1: Rising Health-Care Expenditures – Health-care expenditures in the US have increased substantially over time and are growing faster than the national economy – Estimated national health expenditures totaled just over $2.8 trillion in 2012, or 17.6 percent of the nation’s GDP More than one in six dollars of the nation’s income is spent on health care Copyright ©2014 Pearson Education, Inc All rights reserved 15-4 Insight 15.1 How Does U.S Health Spending Compare with Other Countries? Copyright ©2014 Pearson Education, Inc All rights reserved 15-5 Health-Care Problems in the US • Reasons for the increase in spending include: – – – – – – – – – – Increase in consumer demand Advances in technology Cost insulation because of third-party payers Employment-based health insurance State-mandated benefits Increased spending on prescription drugs Cost shifting by Medicare and Medicaid Higher administrative costs Rising prices in the health-care sector Defensive medicine • Aging of the population is not a major factor Copyright ©2014 Pearson Education, Inc All rights reserved 15-6 Health-Care Problems in the US • Problem 2: Many people not have health insurance coverage – 49.9 million people, or 16.3% of the US population had no health insurance coverage in 2010 – Groups with large number of uninsured include: • • • • Foreign born Hispanics, Blacks, and Asians Young adults Low income households – Many people are uninsured because the coverage is not affordable – Many low income people who are eligible for Medicaid are not aware they are eligible Copyright ©2014 Pearson Education, Inc All rights reserved 15-7 Health-Care Problems in the US • The consequences of being uninsured are severe: – The uninsured often delay or skip needed medical care because of high costs – When the uninsured receive medical care, they frequently pay more for that care – Uninsured adults are less likely to have a regular source of medical care – The uninsured often not have access to regular screenings and preventive care – The uninsured are sicker an die earlier than people with insurance Copyright ©2014 Pearson Education, Inc All rights reserved 15-8 Insight 15.2 More Than Seventy Percent of the Uninsured Have Gone Without Health Coverage for More Than a Year Copyright ©2014 Pearson Education, Inc All rights reserved 15-9 Health-Care Problems in the US • Problem 3: Uneven Quality of Medical Care – The quality of care has improved over time – The quality of medical care varies widely depending on geographic location, type of health insurance plan, and disease being treated Copyright ©2014 Pearson Education, Inc All rights reserved 15-10 Long-Term Care Insurance • Common features of LTC policies include: – Daily benefits range from $50 - $300 or more – Most policies are reimbursement policies, which reimburse for actual charges up to a daily limit – Some policies reimburse on a per diem basis – Many insurers offer policies with pooled benefits, which provide a total dollar amount that can be used to pay for the deferent types of long-term care services – An elimination period is a waiting period during which time benefits are not paid Copyright ©2014 Pearson Education, Inc All rights reserved 15-39 Long-Term Care Insurance • In a qualified LTC plan, a benefit trigger must be met to receive benefits Either, – The insured is unable to perform a certain number of activities of daily living (ADLs), or – The insured needs substantial supervision to be protected against threats to health and safety because of a severe cognitive impairment • Nontax-qualified policies often have more liberal eligibility requirements and make benefits available if a medical necessity trigger is met Copyright ©2014 Pearson Education, Inc All rights reserved 15-40 Long-Term Care Insurance • Some plans offer automatic benefit increases to keep up with inflation • Policies are guaranteed renewable • Coverage is expensive, especially at older ages • Most insurers offer optional nonforfeiture benefits, which provide benefits if the insured lapses the policy • Long-term care insurance that meets certain requirements receives favorable income tax treatment Copyright ©2014 Pearson Education, Inc All rights reserved 15-41 Long Term Care Insurance • Some states have long-term care partnership programs designed to reduce Medicaid expenditures by eliminating or reducing incentives of some people to rely on Medicaid to pay for long-term care • To encourage people to purchase private partnership policies, part or all of their assets are protected from the Medicaid spend-down requirements Copyright ©2014 Pearson Education, Inc All rights reserved 15-42 Disability-Income Insurance • The financial impact of total disability on present savings, assets, and ability to earn an income can be devastating • Disability-income insurance provides income payments when the insured is unable to work because of sickness or injury – Income payments are typically limited to 60-80% of gross earnings Copyright ©2014 Pearson Education, Inc All rights reserved 15-43 Disability-Income Insurance • The most common definitions of total disability are: – Inability to perform the material and substantial duties of your regular occupation – Inability to perform the material and substantial duties of your occupation, and are not engaged in any other occupation – Inability to perform the duties of any occupation for which you are reasonably fitted by education, training, and experience – Inability to perform the duties of any gainful occupation – Loss-of-income test, i.e., your income is reduced as a result of sickness or accident Copyright ©2014 Pearson Education, Inc All rights reserved 15-44 Disability-Income Insurance • Partial disability means that you can perform some but not all of the duties of your occupation • Some policies offer partial disability benefits – Usually, partial disability benefits must follow total disability – The partial disability benefits are paid at a reduced rate for a shorter period Copyright ©2014 Pearson Education, Inc All rights reserved 15-45 Disability-Income Insurance • Residual disability applies when you are gainfully employed and not totally disabled but, solely because of sickness or injury, our loss of income is at least 15 percent of your prior income – a pro rata disability benefit is paid to an insured whose earned income is reduced because of an accident or sickness Copyright ©2014 Pearson Education, Inc All rights reserved 15-46 Disability-Income Insurance • The benefit period is the length of time that disability payments are payable after the elimination period is met • Individual policies normally contain an elimination period (waiting period), during which time benefits are not paid • Most policies automatically include a waiverof-premium provision – If the insured is totally disabled for 90 days, future premiums will be waived as long as the insured remains disabled • Policies typically include a rehabilitation provision Copyright ©2014 Pearson Education, Inc All rights reserved 15-47 Disability-Income Insurance • Some policies pay accidental death, dismemberment and loss-of-sight benefits • Optional benefits include: – Under a cost-of-living rider, the insurer periodically adjust benefits for increases in the cost of living – Some insurers provide an option to purchase additional insurance in the future – A Social Security rider pays an additional amount if the policyholder is turned down for SS disability benefits – A return of premiums rider refunds part or all of the premiums if the policyholder’s claim experience is favorable Copyright ©2014 Pearson Education, Inc All rights reserved 15-48 Individual Health Insurance Contractual Provisions • A guaranteed renewable policy is one in which the insurer guarantees to renew the policy at each anniversary date – Premiums can be increased for the underwriting class • Under a noncancellable policy, the insurer cannot change, cancel, or refuse to renew the policy as long as premiums are paid on time – The insurer cannot change the premiums or the rate structure specified in the policy Copyright ©2014 Pearson Education, Inc All rights reserved 15-49 Individual Health Insurance Contractual Provisions • Under a conditionally renewable policy, the policyholder can renew the policy until a specified age – The insurer has the right to decline renewal under conditions specified in the contract • Some policies are nonrenewable and expire at the end of the protection period – The policyholder does not have the contractual right to renew the policy • Beginning in 2014, applicants for medical expense insurance have guaranteed issue of coverage and renewal Copyright ©2014 Pearson Education, Inc All rights reserved 15-50 Individual Health Insurance Contractual Provisions • The Affordable Care Act prohibits the use of preexisting conditions to deny or limit coverage for claims – Health insurers will no longer be able to deny coverage to applicants because of their medical history • Policyholders have 10 days to examine a policy – The policyholder may return the policy; the policy will be void and the entire premium will be refunded Copyright ©2014 Pearson Education, Inc All rights reserved 15-51 Individual Health Insurance Contractual Provisions • Some contractual provisions address claims: – Under a notice of claim provision, the insured must give written notice to the insurer within 20 days after a covered loss occurs – Under a claim forms provision, the insurer is required to send the insured a claim form within 15 days after notice is received – Under the proof-of-loss provision, the insured must send written proof of loss to the insurer within 90 days after a covered loss occurs Copyright ©2014 Pearson Education, Inc All rights reserved 15-52 Individual Medical Expense Contractual Provisions • The grace period is a 31-day period after the premium due date to pay an overdue premium • The reinstatement provision permits the insured to reinstate a lapsed policy • The time limit on certain defenses states that after the policy has been in force for two years, the insurer cannot void the policy or deny a claim on the basis of misstatements in the application, except for fraudulent misstatements Copyright ©2014 Pearson Education, Inc All rights reserved 15-53 ... Uneven Quality of Medical Care – The quality of care has improved over time – The quality of medical care varies widely depending on geographic location, type of health insurance plan, and disease... coinsurance, copayments, and annual out -of- pocket limits – Exclusions Copyright ©2014 Pearson Education, Inc All rights reserved 15- 30 Individual Health Insurance Coverages • Major medical insurance. .. Maternity and newborn care Mental health and substance use disorder services Prescription drugs Rehabilitative services and devices Laboratory services Preventive and wellness services and chronic