Ch 11: Assignment - Planning for Health Care Expenses

Disability income insurance is designed to pay you while you are disabled. Sources of funding are as follows: • Your employer's disability insurance plan • Your private disability insurance plan • Social Security disability benefits

NA

Long-term care insurance You've decided to obtain long-term care insurance and have done your homework to learn about the features of different plans. Double check your knowledge to help you select the plan that's right for you by answering the following questions.

NA

Even if you are currently healthy, look around. You probably know people, perhaps even family members, who require assistance to live on a day-to-day basis. The older you are, the ___ likely you'll need help. Keep in mind, though, if you are relatively young, you could need such care. Your need would likely be due to ___ rather than ___ . If you experience a serious injury or illness, you will have medical expenses, some of which you will be responsible for paying. If you are employed, further financial strain could be due to a loss of income while you are out of work during recovery. If your disability extends for a lengthy time or is permanent, the financial effects could be devastating.

more a serious illness or accident the aging process

Social security disability income insurance is a ___ government program. If you became disabled, it could replace a portion of your lost income. You would have to be ___ disabled and your expected disability period would have to be for ___ .

federal totally at least one year

Short-term disability income insurance replaces a portion of lost income ___ . Long-term disability income insurance replaces a portion of lost income for a long period (five or more years). Employers who offer long-term plans usually ___ the premiums.

for an abbreviated time do not pay

Benefit duration You've decided to limit the duration of your benefit payments, should you need them, to a 4-year plan, which will cost ___ a lifetime plan. Besides the specific premium costs associated with the length of the benefit period, you made this decision because the average nursing home stay is ___ the term of the policy you selected. That average is ___ years.

less than less than 2.5

Daily benefits Suppose two policies are similar in all other provisions except that one has a $300 daily maximum benefit and the other has a $750 daily maximum benefit. The premium for the $300 provision will cost the ___ $750 provision. If you select the $300 provision, need to collect benefits, and the cost of your daily care exceeds $300, you will pay ___ out-of-pocket expense than you would for the $750 provision.

less than more

Type of care 1. What are the usual categories of nursing home care? Check all that apply. Some people who need care can remain in their homes. Long-term care policies ___ be written to include some level of home care. The expenses for nursing home care are ___ they are for home care.

1. Intermediate Care AND skilled nursing care AND Custodial Care _____________________________ can greater than

Persons covered Under the Affordable Care Act (ACA) of 2010, young adults can remain on their parents' insurance until they are ___-year-old.

26

In 2012 Jamaal became responsible for providing his own health insurance. He obtained suitable coverage and paid annual premiums for each year of coverage as shown in the following table. Compute Jamaal's total premiums: Jamaal's Premiums: 2012 $4,445 2013 $4,724 2014. $4,836 2015. $5,079 Total. $_______ Except for an occasional minor illness requiring a doctor's attention, perhaps a drug prescription, and periodic, routine tests, Jamaal enjoyed good health during those years. There was never a reason to think that would change and by the end of 2014, he had considered dropping his health insurance coverage. After all, with premiums on the rise, Jamaal could think of many other uses for the thousands of dollars he spent each year, definitely much more than his medical bills since 2012. Jamaal decided to pay premiums for another year but planned to take another look at his health care plan at the end of 2015.

$19,084

Match the types of provisions on the left with the descriptions on the right. Read each description carefully, and select the letter of the description in the Answer column next to the correct provision. These are not necessarily complete definitions, but there is only one possible answer for each type of provision. 1. Dental and vision services 2. Typical health care plan 3. Co-payment 4. Medicaid 5. Affordable Health Care Act 6. A family 7. January 1 to December 31 8. Certificate of insurance

1. Covered under the required 10 essential services of the AMA. 2. Coverage for hospitalization, surgery, physicians, prescription drugs, diagnostic tests. 3. A variation of a deductible that requires you to pay a specific dollar amount each time you use your benefits for a specific covered expense item. 4. A government health care program for low-income people funded jointly by the federal and state governments. 5. Allows young adults to remain under their parent's health care coverage until they are 26 years old. 6. Generally consists of parents and dependent children. 7. Usual period of plan coverage is 1 year. 8. Outlines group health insurance benefits.

1. Part A 2. Part B 3. Part D 4. Advantage Plan

1. Covers hospitalization; no premium payment required 2. Covers outpatient care, doctor office visits; requires monthly premium payment 3. Covers prescriptions 4. Combines Parts A and B into one plan; offered by private companies

In December, 2015, Jamaal accepted an invitation from friends to go snowboarding. Jamaal did everything right: took a lesson, rode on trails well within his skill level, and maintained awareness of people and objects near him. Even though he thought it was a bit dorky to wear wrist guards and a helmet, his friends insisted that he take standard and reasonable safety measures. Jamaal was enjoying the day when, from out of nowhere (actually, the woods), came an out-of-control skier who ran into Jamaal. Jamaal was injured and taken to the nearest hospital by ambulance. Jamaal's injuries included a broken wrist and elbow as well as cuts and bruises. Of biggest concern was the uncertainty of his head injury. Jamaal spent a couple days in intensive care. Fortunately, he didn't have a broken skull, but did have a concussion. Surgery repaired the broken wrist and elbow. Since Jamaal was in good health, he completely recovered. Jamaal returned to full function in about six months. Soon after Jamaal returned home, the medical bills for the ambulance, emergency room, intensive care, medications, doctors, tests, and other services arrived. Jamaal also had to have physical therapy for his wrist and elbow. His total medical expenses were $40,000. It was time to find out if all those premiums paid since 2012 would pay off for this one, albeit dramatic, incident. Overall, Jamaal's insurance paid 85% of the total medical expenses, thus making him responsible for ___% of the expenses, or $___. Jamaal's insurance paid $___. His out-of-pocket expenses for the accident were $___ plus the 2015 insurance premiums of $___ = $___. If Jamaal had canceled his health insurance at the end of 2014, his out-of-pocket expense for the accident would have been $. In this case, did Jamaal benefit from having health insurance? ___..

15 6,000 34,000 6,000 5,079 11,079 40,000 yes

Some employers pay part or all of the health insurance premiums for employees who are enrolled in one of the company's sponsored plans. Assume that during the same period that Jamaal paid for his premiums in full that he had, instead, worked for a firm that paid 75% of his premiums for the same coverage. Instead of paying premiums of $____ over the years, Jamaal would have paid $____ and saved $___. In this case, Jamaal's out-of-pocket expenses for his snowboarding accident would have been ____ they were in the first scenario because ____. Toward the end of 2015, Jamaal re-evaluated his need for health insurance and the premiums he paid over the years. Given the costs of his recent injury, Jamaal is reconsidering the idea of dropping his health care coverage. Jamaal still expects to remain healthy and considers the snowboarding accident an unusual event, rather than representative of a future pattern. He is willing to take more financial risk than he previously did when managing his health care costs. Jamaal will most likely ____ because he will ____.

19,084 4,771 14,313 the same as his employer only contributes to premiums change to a high-deductible health insurance plan save on premium costs but will still be protected against castaphrophe

Inflation protection Suppose the policy you're considering offers inflation protection. The younger you are when you buy your policy, especially if you're under ___, the ___ likely your daily benefit will fall short of what you anticipated in the ___ future. An inflation protection clause increases premiums ___. In conclusion, it's important to learn how to choose the right policy so you can obtain one with ___ coverage at a cost that ___. Becoming familiar with what long-term care involves, and the options available for providing it, will enable you to plan for your future or perhaps help others, particularly older friends or relatives, plan for their futures. It will most likely be emotionally, mentally, and financially easier to make wise decisions about long-term care ___ it becomes necessary.

60 more distant a lot adequate you can afford before

These financial consequences can be so severe that ___ of all personal bankruptcies are caused by health care-related debts. The good news is that recent legislative changes have created programs to protect your health and personal finances. While these programs eliminate your choice of whether to obtain health care coverage, they do allow you to choose the source of your coverage. Depending upon your age, you generally have three alternatives: you can stay on your parents' health care policy until you are ___ years of age; you can purchase policy in the private health care marketplace; or you can obtain a policy from your employer. A plan that an employer offers is an example of ___ plan. Historically, most employers ___ for their employees' health care coverage. As the costs for health care and insurance to cover it have ___ , employers' payments for their employees' health care coverage have ___ .

60% 26 a group paid increased decreased

One important objective of the ACA was to replace insurance policies that legislators felt were old, substandard, or unfair to consumers. To do this, the ACA requires that all health care policies provide ten comprehensive essential benefits to be judged for consumers and policyholders. If a policy fails to provide all ten benefits, it may not be sold in the health care exchanges. Which of the following categories of services or benefits must be provided in quality health care policies? Ambulatory patient services: Mental health services: Preventative and wellness services: Vitamins: Over-the-counter drugs: Emergency services: Rehabilitative services and devices: Maternity and newborn care:

Ambulatory patient services: Required for a policy to be Adequate Mental health services: Required for a policy to be Adequate Preventative and wellness services: Required for a policy to be Adequate Vitamins: Not required for a policy to be Adequate Over-the-counter drugs: Not required for a policy to be Adequate Emergency services: Required for a policy to be Adequate Rehabilitative services and devices: Required for a policy to be Adequate Maternity and newborn care: Required for a policy to be Adequate

Which of the following are protections or benefits provided to you by the ACA? Check all that apply.

As a tobacco user, you may be subject to higher insurance premiums. AND You may not be charged a copayment or deductible for an annual checkup. AND Your policy will no longer contain a maximum annual or lifetime limit on benefits. AND If you are on Medicare, you are eligible for less expensive prescription drugs. AND You are eligible for a free annual checkup, as well as several preventative screenings and wellness measures. AND You cannot be denied coverage due to pre-existing conditions. AND Whether you are male or female, you will be charged the same premium.

Madeline has satisfied her deductible for the year. When she recently saw her doctor for a rash, she was surprised to be charged $20 for the appointment.

Copayment

Earline had a run of bad luck. She sprained her arm, had a staph infection, and needed surgery to remove her appendix. In out-of-pocket expenses, Earline has paid $300 for the sprain, $500 for the infection, and $1,200 for the operation. She still has medical expenses for all three incidents but is relieved that her insurance company is now paying part of the expenses related to all three medical problems.

Deductible

Traditional health insurance, health maintenance organizations (HMOs), and high-deductible health care plans are all examples of plans that cover ___.. Medicare is a ___ government health care program primarily designed to provide health care coverage for the ___ in the United States. Approximately ___ million people ___ are enrolled in the program. Medicare is funded by ___ . Match the Medicare options on the left with the descriptions on the right. Read each description carefully, and select the letter of the description in the Answer column next to the correct Medicare option.

Direct Health Care Costs Federal elderly 57 over 65 both workers and their employers

Alex Alex has traditional health insurance. Which part of a sound health plan does Alex's coverage address?

Direct health care costs

Jake Jake is a subscriber to a health maintenance organization (HMO). Which part of a sound health plan does Jake's coverage address?

Direct health care costs

What are reasonable morals of the story? Check all that apply.

It can be financially risky to go without health insurance. AND Think long and hard about the best trade-off of coverage and cost in a health care plan. AND Your health can change in an instant.

Becky Becky is 73 years old and recently had to move to a nursing home. She recently applied and qualified for Medicaid coverage. Which part of a sound health plan did Becky probably neglect to provide for?

Rehabilitative and custodial care costs

Juanita Juanita recently died at the age of 81. During the last five years of her life, Juanita required round-the-clock care. Even though of modest means, she left an estate whose value is well over $10,000. Which part of a sound health plan did Juanita probably provide for that enabled her to leave assets for her heirs?

Rehabilitative and custodial care costs

Eileen has a job. The first place she should look for health care coverage is ___ . The costs will probably be the ___ for the ___ generous terms and coverage, because coverage under a policy through her employer is a ___ plan, which spreads the costs and risks among more people than ___ plans do. The company has more than 20 workers, and the employer pays 20% of workers' health insurance premiums. Assume that Eileen enrolls in her employer's group plan. If Eileen leaves her job she probably ___ be able to exercise her COBRA rights. If eligible, Eileen ___ remain on the group plan for up to ___ months as long as she pays the ___ . An additional administrative fee would ___ be due from Eileen. Jared, Rodrigo, and Carl are shopping for health insurance coverage. To begin their research, they should look at ___ to ___ . Having a wide range of choices among doctors, hospitals, and other health services is very important to Rodrigo. All other factors being equal, Rodrigo is willing to pay ___ for ___ . Rodrigo and his spouse plan to start a family in the near future. They are concerned about maternity and pediatric care. Carl has a risky lifestyle. He is concerned about emergency treatments and physical rehabilitation. Although Rodrigo and Carl have ___ concerns, they should follow ___ steps to ensure the plans they consider adequately cover their individual requirements. Jared has narrowed down his choices to two HMOs. He ___ check their accreditation. To assess their reputations and degrees of stability, Jared ___ investigate the reasons for significant changes in membership. All other factors being equal, Jared will probably favor the network in which ___ of his current providers participate. Carl is young and healthy. Carl will probably take ___ risk when selecting his health insurance plan than someone, who, although the same age, has a history of leukemia. ___ is more likely to choose a high-deductible health care plan (HDHP). Why? Because between the two of them, ___ is the ___ healthy and, therefore, willing to take the risk.

The company she works for lowest most group individual will could 18 entire premium also both traditional health insurance and HMOs be thorough more traditional health insurance different the same should should more more Carl Carl most

However, it could take one fall or an insect bite to find you in financial trouble. That's a dramatic statement and one that thousands of people have found is true. There are three ways that an illness or injury can affect your finances, including: Check all that apply.

The direct out-of-pocket costs related to your rehabilitation. AND The direct out-of-pocket costs of a doctor's visit, hospital stay, or surgery. AND The lost income that results when your illness or injury renders you unable to work.

Why is it important to be familiar with what types of care are covered by health insurance plans as well as who is covered and when there is coverage? Check all that apply.

To make cost-effective treatment decisions AND To avoid buying coverage so unlikely to be used that it's not worth the cost AND To minimize the chances of unpleasant surprises, particularly regarding gaps in or lack of coverage AND To obtain the best coverage for the lowest cost

High-Deductible Health Care Plans (HDHP) Alex has consulted his primary physician regarding his stress level at work. His physician has given him some behavioral modification advice but did not formally refer him to a psychiatrist. Although Alex's primary physician didn't refer him to a psychiatrist, he is wondering whether a psychiatrist might be able to further assist him with his stress issues. Assume that Alex places a value of getting a second opinion on his stress condition from a psychiatrist at $20. Further assume that the only psychiatrist in town charges $55 for an appointment. Suppose Alex has a traditional health insurance policy. The policy does not have a deductible and has a $12 copayment per office visit with a specialist or primary physician. Alex ___ choose to see the psychiatrist for a second opinion because the value he places on the psychiatrist's opinion is ___ the cost he has to pay out of pocket. Now suppose Alex has a high deductible health care plan (HDHP) and hasn't met the deductible for the year. Alex ___ be responsible for paying the full cost of the visit with the psychiatrist. Alex ___ make an appointment because the cost would be ___ the value he places on seeing the specialist.

Would greaten than would would not greater than

Which of the following statements regarding the Affordable Care Act (ACA) are true? Check all that apply.

You can have a coverage gap of up to three months without incurring the lack-of-coverage penalty. AND A stated goal of the ACA is to provide a quality health care plan to all U.S. citizens and legal residents. AND Under ACA, the price of a health care policy is to be determined by supply, demand, geographic location, and competition. AND A quality health care plan must meet the government's standard for ten essential benefits. AND A stated goal of the ACA is to focus on prevention and primary care so that covered individuals will stay healthy. AND Only three factors can affect the cost of your health insurance coverage: your age, your place of residence, and, if obtaining a family policy, the number of people in your family. AND The individual mandate requires all citizens and legal residents to purchase health insurance.

Degree of disability Brian loves his job, and, if he becomes disabled, doesn't want to do any other job. Yet, he'll need an income. Even though it will cost him more, he will buy ___ disability policy. The cost is more because the insurer has ___ flexibility when determining if the insured is eligible for coverage.

an own occupation less

Pre-existing conditions drawbacks One of the ___ of the Affordable Care Act is that, beginning in 2014, it ___ exclusion from coverage for individuals with pre-existing conditions. This provision is called the ___ .

benefits prevented individual mandate

Cancellation Under the ACA the insurer ___ cancel your coverage if you get sick or make an honest mistake on your application. If you are in a group plan, you renew your coverage ___ .

cannot during the plan/s open-enrollment period

Long-term care includes, but is not limited, to providing medical and personal care (other than hospitalization) to people with __ medical conditions such as___ .

chronic dementia

But I Paid My Premiums! And then there are those other costs associated with medical expense insurance plans. Read the following scenarios and select which type of other cost or provision each illustrates. Eileen had a horrible accident that required a year of treatments and rehabilitation. Fortunately, Eileen's policy caps how much out-of-pocket expense she has to pay.

coinsurance

Madeline has had an illness and an accident during the year. Her combined out-of-pocket expense for both incidents is $1,000. The insurance company will now start to pay some of her medical expenses. What does the $1,000 represent?

deductible

Waiting period Most policies have a waiting period before benefits begin (not retroactively). The longer the waiting period, the ___ the premium.

lower

Age The age at which you buy your insurance affects how much you pay for your annual premium as well as how much your premiums will add up to over the years. The younger you are when you buy the coverage, the ___ the annual premiums and the likely you are to be rejected for a preexisting condition. The total of the premiums you pay over the years ___ the cost of the care you'll need.

lower less may or may not be less than

Length of coverage Jared has a great job that pays well. He plans to work all his life. His only source of income is his paycheck. He takes trips and enjoys other extras in life. Since becoming disabled can bring financial ruin, Jared should strongly consider purchasing disability income insurance. It is most important that the policy include a ___ clause. A ___ clause would increase his benefit to keep up with inflation as long as he has coverage, but a ___ clause ensures he will always have coverage. Without this clause, if the insurance company canceled his policy and he became disabled, he'd lose a lot ___ without any coverage than he would have had he collected benefits without adjustments for inflation.

noncancellation cost-of-living adjustment noncancellation more

Long-term care insurance pays for some of this care. If you don't want to spend down your assets on your care, you ___ consider buying the insurance. If you require long-term care and have long-term care insurance, your out-of-pocket cost for your care will be ___ it would have been without the coverage.

should less than

Medicaid is a government health care program designed primarily to provide health care coverage for ___ the United States. Eligibility for this program is based on___. Medicaid is funded by___ . You ___ use your Medicaid coverage for long-term care unless your financial position improved so that you no longer qualify for Medicaid.

the poor in household income both federal and state governments could

Degree of impairment required for benefits You may take activities of daily living (ADLs), such as dressing, getting in and out of bed, bathing, and walking, for granted. But these are just a few examples of functions that people who need long-term care can no longer perform. To begin to receive benefits from your long-term care insurance coverage, you usually must be unable to perform ___ of the activities of daily living (ADLs) as defined by your insurance policy. Since the ADL that is most commonly lost first is ___, your policy ___ include it as a defined ADL.

two or three bathing should

Benefit period Upon retirement at age 65, Brian expects to collect a pension, Social Security, and draw on his IRA. His best friend works under the table and has a small IRA. Brian will most likely buy a disability income insurance policy that covers him ___. He will suggest that his friend purchase a policy that provides coverage ____ . Brian made this choice and this suggestion because the purpose of disability income insurance is to provide funds when income is lost due to illness or injury. If he becomes disabled after he retires, he ___ lose his pension, Social Security, or IRA income. If his friend becomes disabled, the small IRA is to be sufficient to provide for basic necessities while he's unable to work. Additional income ___ be necessary to pay the simplest expenses.

until he retires at age 65 for a lifetime will not unlikely will

Continuation of group coverage In most cases, this provision allows you to remain covered under your former employer's group plan for up to ___ months after termination, as long as you ___ . In most states, after COBRA expires, you ___ the opportunity to convert the group policy to an individual policy.

18 pay the premiums on time have

Where is long-term care generally provided? Check all that apply.

A nursing home AND The patient's home

Amy's been hospitalized for an illness. Her insurance company has started paying 90% of covered medical expenses.

Coinsurance

Earline always pays a set dollar amount for a visit to her doctor's office.

Copayment

Gender Because women's life expectancies are longer than men's, one would expect the cost of premiums for disability income insurance with the same terms to be ___ for a woman than a man. Also, for a woman to pay approximately the same premium as a man her age for coverage, she has to purchase a policy with ___ restrictions than a man's policy.

more more

Planning for Long-Term Care No matter what your age, it can be hard to imagine becoming so ill or frail that you can no longer care for yourself.

na

Long-term custodial care may be required when a patient ___ skilled medical care but cannot care for him- or herself. Costs for long-term care ___ covered by HMOs, health insurance, or Medicare because they are generally deemed ___.

no longer needs are not not medically necessary

Social Security disability benefits There are stringent requirements to qualify for Social Security disability benefits. ___ of those who apply are rejected. To provide benefits that would have come from Social Security, guard against rejection by ____ a Social Security rider when purchasing a disability income insurance policy.

the majority including

Waiting period Eileen has had a disability income insurance policy for many years. She has a rainy-day emergency savings account that would support her for 3 months. If she loses income due to injury or illness, she plans to use these funds until the 90-day ___ period expires, after which she ___ begin receiving benefits from her disability income insurance policy.

waiting would

Adjustments All this research is exhausting—Brian wants to buy his policy and not have to review his coverages for a long time. The best policy for his peace of mind will provide benefits ___. He expects to have a lucrative career with frequent and substantial pay increases. He'll also make sure his disability policy pays a stated ___. In conclusion, it's important to learn how to choose the right policy that provides ___ coverage at an affordable cost.

with cost-of-living adjustments percentage of his income adequate