Lesson 2 - health ins. Flashcards
Grace Period
Usually atleast 31 days, So long as premiums are paid before the end of this grace period, the policy will remain in force and will not lapse.
incontestability clause
protects the insured by preventing the insurer from challenging the validity of the health insurance contract after it has been in force for a specified period of time.
- Insurer fails to ask info
- Insured unknowingly misrepresents info
- NOT with intent for fraud/to deceive
Non-Cancelable
As long as the policy premium is paid, a non-cancelable policy prevents the insurance company from: canceling, increasing premiums, reducing benefits
(until specified age)
-greatest degree of protection to insured
Guaranteed Renewable
health insurance policies require the insurance company to renew the policy for a specified period of time, or until the insured attains a certain age
-premium increases on CLASS BASIS- not based on individual health/disease
Deductibles, Copayments, COINSURANCE (THIS IS ABOUT COINSURANCE).
A coinsurance requirement of 20% will be expressed as 80/20.
A coinsurance requirement of 10% will be expressed as 90/10.
*You pay 20% or 10% in these cases
Out of Pocket Maximum
Health insurance policies set annual maximums that the insured must pay out-of-pocket.
Individual vs. Group
Individual may have more options, but more expensive than group
Smaller premiums b/c - claims risk spread among pool of participants in group, admin costs spread across more people
*group allows insureds to obtain coverage without physical and proof of insurability
Types of Group Health Insurance
- Group Basic - covers hospital and physician bills, and surgical bills, but typically has low policy limits.
- Group Major - supplements basic medical coverage by permitting a wider array of services and increasing policy maximums.
- Group Comprehensive Major - both basic and major, typically deductibles low, require copay
Types of Individual Health Insurance: Major Medical
Major Medical: coverage for hospital and physician’s and surgeon’s fees, medications, and durable medical equipment NOT USUALLY dental and routine eye exams, excludes self inflicted injuries and cosmetic procedures
Indemnity Plan Insurance (Both individual and group) (traditional)
- whole range of health care practitioners at their disposal and not be locked into a service network system for medical care.
- hospital expenses, physician expenses, and surgical expenses.
- Most flexibility, highest premiums
Managed Care Plans
-focus on more holistic health coverage and preventative care.
HMO - patient choice limited by need to establish network of approved health care providers AND presence of primary care gatekeeper for specialist services
(preferred to those who don’t travel much)
PPO - obtain discounted health care services from the preferred providers within the network, larger pool…not required to receive services from preferred providers, but higher deductibles and coinsurance payments may apply when services are obtained from providers outside of the network.
(both HMO and PPO charge more for working with out of network, both managed care plans that focus on preventative care)
POS - managed care/indemnity plan hybrid, contracted provider network, members encouraged to choose within network but can be referred out of network but higher deduct. and coinsurance if services on indemnity side
Taxation of Health Insurance Policies
- Individual receives benefits under health ins. policy used to pay for health care of insured - tax free, no taxable event occurs
- With Group - when benefits provided and paid for by employer, no taxable event for employee
(don’t have to report benefits used for health as income)
COBRA
- Smooth transition out of group for group member or their family
- Applies to employee, dependent child, or spouse
- Extends with same coverage…insured pays without employer assistance, employer may charge 2% for admin (102% increase)
- COBRA applies to groups with atleast 20 employees
- doesn’t apply if fired for gross misconduct
Periods of Coverage:
18 months: reduction in hours or normal termination
29 months: employee meets SS def. of disabled
36 months: death of covered employee
36 months: divorce
36 months: employee becomes eligible for Medicare (65)
Health Savings Accounts (HSAs)
- Can be established by individuals or employers
- HSA funds can be invested
- Tax advantages, individuals must be covered by a high deductible health ins. plans and some HSA have high annual fee
- Look to slides for max contributions/min deductible stats.
- Pre tax contributions (above the line) and employer contrib. don’t count towards income
- Can carry over unused amounts to future years, and no restrictions on investments
- Job change - can leave with same brokerage or transfer, open new and transfer $$
- Distrib. for qual expenses not included in income
- Contrib. and returns received tax free if used for doc visit, hospital care, elective procedures, pres. meds, insulin (no prescrip necessary), OTC med
- Earnings tax deferred if HSA open at 65
(distr. taxes as OI doesn’t have to be healthcare) - Distr. before 65 not for qual. expense = OI tax and 20% penalty
Flexible Savings Account (FSA)
- similar but avail. for those w/out high deductible plans
- pre tax dollars, above line contrib.
- FSA funds not invested
- Funds in FSA same as HSa but FSA can be used to pay health care premiums
- Contributed amounts must be used for med exp. by end of year or forfeited to company (2 and a half months after end of plan year)
- limited to $2750
