BT nhóm Tài chính cá nhân chapter 11,12 Managing Health Expenses Life Insurance Planning

Managing
Health
Expenses &
Life Insurance
Planning
Group
4


I. Managing Health
Expenses

1


Introduction
There are three finance burdens related to
health issue:
1. Direct medical care costs
2. Long-term rehabilitative and custodial
care costs
3. Lost Income when you cannot work due
to illness or injury

2


Identify ways that
people can
manage the
financial burdens

resulting from
illness or injury

3


Types of
expenses

Provider
of
coverage

•

•
•

Services
provided

Long-term
care

Direct health care
Health
maintenance
organizations
(HMO)
Medicare for those

aged 65 or more
Medicaid for lowincome

•
•
•

Traditional
health
insurance
Medicare
Medicaid

•

Consumerdriven
health
insurance
plans

•
•

Long-term
care
insurance
Medicaid

•
•

Disability
income
insurance
Social
Security for
eligible
workers
and their
families

Hospital, surgical,
medical services
directly through their
own hospital and
physicians or under
contract with such
providers

Reimburses or
pay for
hospital,
surgical,
medical, and
other health
care costs

Reimburses
or pay for
hospital,

surgical,
medical, and
other health
care costs
that exceed a
high
deductibles

Reimburseme
nts for costs
associated
with custodial
care (not
direct medical
care)

Provides a
monthly
income to
replace that
lost when the
insured is
unable to work
due to
accident or
injury

Monthly fee and
prepaid basis

Monthly
premiums on

Monthly
premiums on

Monthly and
5
annual

Monthly
premium

L.O.1. Types of protection from
health-related cost

Payment
mode

Lost income


Types of protection from healthrelated cost
Types of
expenses

Long-term
care

Direct health care

Lost
income

Payment
mode

Monthly fee and
prepaid basis

Monthly
premiums on
the insurance
coverage

Monthly
premiums on
the
insurance
coverage

Monthly and
annual
premiums

Monthly
premium

Purchased
by

Individual or
employers as
employee benefits

Individual or
employers as
employee
benefits

Individual or
employers as
employee
benefits

Individual

Individual
or
employers
as
employee
benefits

5


PROTECTING FROM DIRECT HEALTH CARE COST

❄ Health care plan: a generic name

for any program that pays or
provides reimbursement for direct
health care costs

6


❄

HEALTH MAINTENANCE
ORGANIZATIONS
Health maintenance organizations (HMO):

health

insurance plans that provide a broad range of
health care services for a set monthly fee on a
prepaid basis
❄ HMO subscribers are assigned/ choose a primary
physicians

within

HMO



choose

health

service

providers within HMO
☆  it helps to identify any health problems
early, which helps keep overall costs low by
reducing the probability of high-cost treatment

7


TRADITIONAL HEALTH INSURANCE
❄ Traditional Health insurance is based on the concept of
reimbursement for losses, with the patient choosing the type
of care based on the advice of his/her physician
 indemnity plan / fee-for-service plan
❄ Preferred provider organization (PPO): a group of health
care providers who contract with a health insurance company to
provide services at a discount
 If choosing PPO, Policy holder received the discount in the form
of reductions or eliminations of deductibles, coinsurance
8


CONSUMER-DRIVEN HEALTH CARE PLANS
❄ Consumer-driven health care: an approach to health
care protection where the customer selects a health care
plan with a high deductible and high overall policy
limits.
Consumers

will

be

more

careful

in

spending

money
Give

the

consumers

the

opportunity

and

responsibility to manage their health care costs.
9

CONSUMER-DRIVEN HEALTH CARE PLANS
Types of Consumer-driven health care:
❄ High-deductible health care plan: a tax-exempt account
created to pay for qualified medical expenses of the account
holder and their dependents.
Lower

premiums,

Higher

deductible,

higher

out-of-pocket

expenses, Higher policy limit
☆  to cover the high deductibles, holders of high-deductible
health care plan are allowed to open Health Savings
Account (HSA).
☆ HSA is a tax-deductible savings account in which account
holder or their employers can deposit pretax income to use for

10


CONSUMER-DRIVEN HEALTH CARE PLANS
Types of Consumer-driven health care:
❄ Health Reimbursement Arrangements: funds set aside by

employers to reimburse employees for qualified medical
expenses.
❄ Flexible spending arrangements: an employer-sponsored
account that allows employee-paid expenses for medical or
dependent care to be paid with an employee’s pretax dollars
rather than after-tax income

11


Explain the basics
of planning for longterm custodial care.

12


Planning for Long-Term Custodial
 Injuries, severe illnesses and certain conditions often require
Care
a long period of custodial care in a nursing home or at home.
Because this care is custodial and not directly medical in
nature it is not covered by health care plans.
 Long-term care cost can be reimbursed by long-term care
insurance or Medicaid (for low income)
 Long-term care insurance provides reimbursement for
costs associated with custodial care in a nursing facility or at
home.
 Long-term care insurance is the most useful to middleincome people.

13

Planning for Long-Term
Custodial Care
There are some factors to consider when buying
long-term care insurance
1. The degree of impairment required for benefits
to begin
☆

Activities of Daily Living (ADLs)

2. The level of care covered
☆

Skilled nursing care

☆

Intermediate care

☆

Custodial care

14


Planning for Long-Term
Custodial Care

3. The person’s age

4. The benefit amount
5.

The benefit period: the time period you will receive

benefit
6.

The waiting period: the time you have to wait/pay

by yourself before the insurance company pay for you
7.

Inflation protection

You will also want to trade-off the benefit period and the
waiting period. Selecting a longer waiting period will
allow you to pay lower premium and afford a longer
benefit period.
15


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

16


Protecting Your Income During
Disability
❄ Disability income insurance
❄ Social Security disability insurance

17


What is your level of need?
Long-term care policies will typically only cover
about 60-80 percent of the insured’s after-tax
income.

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18


What is your level of need?
Calculation of needs starts with current after-tax income
and then subtracts Social Security disability benefits,
employer-based disability benefits, and any other existing
disability insurance.

19

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.

20


Protecting Your Income During Disability
❄ Consider the degree of disability.
 An own-occupation policy will provide benefits if
you can no longer perform the occupation you
had before becoming disabled.
 A residual clause allows for reduced benefits
when a partial disability occurs.

21


Protecting Your Income During Disability
 An any-occupation policy will provide full
benefits only if you cannot perform any
occupation. Typically, it will provide the
difference in income between your prior and
after-disability occupation.

22


Protecting Your Income During Disability
❄ Important disability income insurance
policy provisions:
 Social Security rider
 Cost-of-living adjustments

23


II. Life Insurance Planning
Introduction
❄ There are two primary risks related to longevity
and finances:
☆
Risk of dying too soon
☆

Risk of living too long
24