Chapter 3 Health Insurance

What is the catch up contribution for HSAs for those 55 and older

$1,000

What is the minimum annual deductible for individual coverage for 2020?

$1,400

What is the minimum annual deductible and out of pocket expenses for family coverage for 2019?

$13,800

What is the minimum annual deductible for Family coverage for 2019?

$2,800

What is the max contribution for individuals in an HSA for the calendar year 2019?

$3,550

What is the minimum annual deductible and other out of pocket expenses for individual coverage for 2020?

$6,900

What is the max contribution for Family's in an HSA for the calendar year 2019?

$7,100

What is POS insurance?

A point of service plan (POS) is considered a managed care/indemnity plan hybrid, as it mixes aspects of in-network and fee-for-service for greater patient choice. Like an HMO and a PPO, a POS plan has a contracted provider network. POS plans encourage members to choose a primary care physician from within the health care network. This physician becomes the patient's "point of service." The in-network, primary care physician may make referrals outside of the network, if the patient prefers an out-of-network provider, but higher deductibles and coinsurance payments may apply if the insured is receiving services on the indemnity side.

Why do financial planners recommend clients not self insure?

Health insurance can be expensive and deplete the financial resources of a client. When a person turns 65 and they are eligible for government provided health insurance. Part A is a payroll deduction taken from your salary throuhout your working career while medicare part b is a cost that is deducted from an individuals social security benefits.

What are the three main types of managed care approaches to health insurance coverage?

Health maintenance Organization (HMO), Preferred Provider Organization (PPO), and Point of Service Plans (POS)

What is an HMO?

Health maintenance organizations were authorized by the HMO act of 1973. Ultimately a group of physicians band together forming a network that provide primary care to members. Physicians are employed by the HMO directly, or may be physicians in private practice who have chosen to participate in the HMO network. The disadvantage of an HMO is that they often only provide coverage within their network f doctors and physicians.

Describe what medical expense insurance covers, and name the subcategories of it

Hospital expense coverage, Physicians expense insurance, and surgical expense insurance

What is Hospital expense coverage?

Hospital expense coverage, as the name implies, pays for costs of medical care while the insured (or family members, if a family policy) are in the hospital. Amounts billed directly by the hospital are covered, subject to policy limitations, but separately billed items, such as doctors and surgeon's fees, and x-ray fees for services performed outside of a hospital are not covered by a hospital expense policy. Many policies limit coverage to a specified number of days, such as 60, 90, or 180 days.

Explain the reasoning behind the criticism of managed care insurance plans.

One of the main criticisms of managed care is the insurance company has a say in what treatment will be covered. This creates an ethical dilemma as physicians cannot discuss alternative options of care. It is generally a cheap option.

What is an FSA? Flexible spending account

Permits employees to defer income to the FSA to pay for health care premiums and out of pocket expenses with pre tax dollars. Unused amounts however, go to the company. Max balance is $2,500 indexed for inflation.

What is Physicians expense insurance?

Physicians expense insurance provides coverage for fees charged by physicians for office visits and tests that are not performed in the hospital (such as blood work, x-rays, and non-surgical procedures).

What are some advantages of HSAs?

Pre-tax contributions Funds carry over year to year Funds can be invested Permits reimbursement of prescription purchases No prescription necessary for insulin.

What are some advantages of FSA?

Pre-tax contributions Participants have total control over spending within the account Can be used for optional treatments like lasik and braces Permits reimbursement of prescription purchases No prescription necessary for insulin.

Can you rollover your HSA to another?

Yes, you are permitted one 60 day rollover per year.

What is an HSA (Health Savings Account)?

is an account that may be set up by individuals or employers that allow eligible individuals to save for health care costs on a tax advantaged basis. Contributions are tax deductible from AGI and qualified distributions are not taxable.

What are some of the benefits of group health insurance?

the ability to obtain coverage at a reasonable premium. Underwriting a large group of individuals permits the insurer to spread the claims risk among the pool of participants, and having a large group of participants spreads the administrative costs of the plan across more people. smaller premiums for group insurance when compared to individual health insurance policies.

What are some penalties for not providing healthcare to your employees?

- If you atlest 50 employees you are at risk of facing significant tax penalties for not providing health coverage. - If you are under 50 employees you receive tax credits to provide health insurance. - Individuals that do not purchase a qualified health insurance contract are subject to a tax penalty.

Who are some exempt individuals from the ACA mandate?

- Religious objectors or those that are part of a organization - Individuals who are not citizens or nationals of the US or illegals - Incarcerated individuals - Individuals with no affordable coverage members of indian tribes - Household income below the filing threshold - Those with hardship exemption certification

After moving from full-time to part-time status how long can a person stay on their former employer group health insurance plan according to COBRA?

18 months

After termination of employment how long can a person stay on their former employer group health insurance plan according to COBRA?

18 months

If an employee meets the Social Security definition of disabled, how long can a person stay on their former employer group health insurance plan according to COBRA?

24 months

Danielle is 27 and just finished medical school, she no longer has health coverage, how long will she remain covered on her parents employer group health insurance plan according to COBRA?

36 months

Gina is 63 and her husband who just retired at 65 is on Medicare, how long will she remain covered on his former employers group health insurance plan according to COBRA?

36 months

If there is a death of a covered employee, how long do dependents or spouses remain covered on their former employer group health insurance plan according to COBRA?

36 months

If there is a divorce or legal separation of a covered employee, how long do dependents or spouses remain covered on their former employer group health insurance plan according to COBRA?

36 months

What is Optionally renewable?

An optionally renewable policy permits the insurance company to cancel at any time except during the term of the contract. They do not have to provide a reason.

Describe the inverse relationship between deductibles and premiums

As deductibles grow , the premium gets lower since many of the first health care expenses encountered during the year will be paid for by the insured, reducing claims-flow and administrative burdens for the insurer.

What are some Plan categories in for the ACA?

Bronze plan represents minimum allowable coverage and covers 60% of the benefit costs, with an out-of-pocket limit equal to the Health Savings Account (HSA) limit. Silver plan covers 70% of the benefit costs, same out-of-pocket limit. Gold plan covers 80% of the benefit costs, same out-of-pocket limit. Platinum plan covers 90% of the benefit costs, same out-of-pocket limit. Premium and cost sharing credits available to individuals/families with income between 133-400% of the federal poverty level.

Who is eligible for a group health insurance plan?

Typically an individual that works full time is eligible for a group health plan

What are some disadvantages of FSAs?

Employers may offer either a grace period of 2 months and 15 days to spend unused funds from the prior year OR allow up to a $500 rollover to the subsequent year. They may not offer both. Cannot receive distribution amounts that are covered under another health plan Limited to $2,750 for 2020

True or False: Employers may deduct the costs of providing health insurance only if the employee includes the monetary benefit derived from that insurance as income

False. The monetary benefit derived from an employer funded health insurance plan is specifically excluded from income.

True or False. The most common types of medical expense insurance are: hospital expense insurance, pharmacy expense insurance, and surgical expense insurance.

False. The most common types of medical insurance are: hospital, physician, and surgical expense insurance.

True or False. Once an insured meets the out-of-pocket maximum, not taking into account the deductible is paid, the insurer pays full amount up to specified ceiling.

False. The out-of-pocket maximum takes into account deductibles paid, as well as the coinsurance or co-pay amounts

True or False: The emergence of managed care plans was born from a desire to decrease competition among health care providers.

False. They were born from the desire to decrease healthcare costs and increase competition.

True or False: Adverse selection occurs when health insurance plan refuse to renew health insurance for people if they become ill.

False. This is the opposite of inverse selection as it Deny's insurance companies the right to spread risks because it makes it so the ones that are sick are the only ones that seek insurance.

True or False: Upon voluntary termination of employment, one may stay on with the former employer's group insurance plan

False. Upon voluntary termination, one may stay on the employers policy for no longer than 18 months.

True or False: Underwriting a large number of people spreads the actuarial risk among the pool for group health insurance, but participants drive up the administrative costs

False. When underwriting a large group of people, both actuarial risk and adminstrative costs are spread amongst participants

What criteria must be met for something to be considered health insurance policy?

Get PIPED

What is the difference between Group hospitalization and Major medical policy and individual major medical policy?

Group hospitalization and major medical policy, the insured pays only the maximum out of pocket amount. On an individual major medical policy, the insured pays deductible and stop loss amount.

What if the HSA account owner dies and the beneficiary is not the spouse?

If the account is left to anyone other than the spouse, the death of the participant terminates the HSA, and the remaining balance will be subject to income tax (but not penalty) in the hands of the beneficiary.

What is Indemnity health insurance and what are the pros and cons?

Indemnity health insurance is also referred to as a traditional health insurance plan. Indemnity health insurance plans allow participants the benefit of having a whole range of health care practitioners at their disposal and not be locked into a service network system for medical care. Indemnity health insurance is the most flexible type of insurance policy, but participants also pay some of the highest premiums in order to have the flexibility of choosing their own health care providers. Typically, indemnity plans have deductibles, no copays, and coinsurance for major medical.

Define out of pocket maximums

Is the sum of the deductible and the insured's portion of the coinsurance.

What is Guaranteed renewable?

It provides that the insurance company must renew the policy for a specific time period. Premiums can increase as long as it is acroos the board for all policy holders. It can not change just because someone gets a disease and the costs are higher for them

What are some disadvantages of HSAs?

Much have a high deductible health plan to qualify Some HSAs have high annual fees

What makes someone eligible or ineligible for an HSA

Must be covered by a high deductible health insurance plan. Dependents and those that are covered by Medicare not eligible to make contributions to HSAs

What are the renewability rights provided in health insurance contracts?

Non-cancelable, Guaranteed renewable, conditionally renewable and optionally renewable

What is Surgical Expense Insurance?

Surgical expense insurance pays for surgeon's fees when a surgical procedure is not conducted in a hospital (if the surgical procedure was conducted in the hospital, these expenses would be covered by the hospital expense coverage policy).

What are the advantages and disadvantages of POS Plans?

Pro's: Freedom of choice for managed care, not limited to only HMO network providers, costs are minimal for in network care, annual out of pocket costs are limited, no referral is needed for choosing an out of network doctor. Cons: Copays for our of network providers are high, there are deductibles for out of network providers, sometimes difficult and complicated to get specialized care with in network providers.

What are the advantages and disadvantages of HMOs?

Pro's: There is a fixed fee for health care, low copayments, total health care costs are generally lower and more predictable than with PPO or POS. Con's Gatekeeper for specialists services so it is often difficult and complicated to get specialized care, Longer waits for non0emergency doctor appointments, Any health care costs from out of network providers, except in emergencies are not well covered if at all.

What are the advantages and disadvantages of PPOs?

Pro's: health care costs are low when using in network providers, no gatekeeper required for specialist consultations, including out of network providers, primary care physicians are not required, yearly out of pocket costs are limited Con's Out of network treatment is more expensive, copayments are generally larger than with HMOs, may need to satisfy a deductible when working with out of network providers, and coinsurance may apply when out of network.

What is the tax penalty for individuals and families who do not comply with the ACA?

Tax penalty for non-compliance : $695 per person up to $2,085 per family or 2.5% of household income above the tax filing threshold, whichever is greater.

What benefit does an employer get from providing group health insurance to its employees?

The employer can deduct the costs of providing group health insurance to its employees as an ordinary and necessary business expense.

What is conditionally renewable?

The insurance company has the right to cancel the policy once it is up for renewal. The company must specify the conditions that will result in loss of coverage

What is the purpose of the pre-existing insurance clause?

The purpose is to prevent adverse selection against the insurance company, and to permit the risk spreading function to work. It keeps those that have certain conditions from taking advantage of the insurance company and only buying the insurance when they need the care. Because of the ACA, applicants are not denied insurance if they have preexisting conditions.

What is the reinstatement clause?

This is the time period in which the insurer can reinstate the policy without going through the underwriting process again.

What is Non cancellable

This prevents the policy from stopping for any reason provided that the policy premium is paid. Most policies indicate that no changes in premiums can be made as long as the premium is payed.

True or False. If one dies prior to spending all of his or her HSA funds, the balance can be paid to someone other than the owner's spouse but that balance is subject to income tax in the hands of the non spouse beneficiary.

True

True or False. The high cost of individual health insurance is partly due to the inability of the insurer to spread the risk among the groups participants

True

True or False.The patient protection and affordable care act as designed to administer a program to provide low cost health insurance to qualified person's

True

True or False: A group comprehensive major medical insurance plan is a combination plan that covers both basic and major health risks

True

True or False: PPO's typically have a wider network of health care providers from which to choose than HMOs

True

True or False: Reasonable premiums and no required proof of insurability (i.e., a physical) are two of the most attractive attributes of group health insurance

True

What is PPO insurance?

Usually have a larger pool of participant health care companies to choose from. They are not required to stay within the network of service providers but are able to go outside the network and pay a fee to the health care company.

What is the incontestability clause?

When a health insurance policy is issued on a non-cancelable or guaranteed renewable basis, the policy often includes an incontestability clause. The 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 (typically two years) unless the insured fraudulently obtained coverage.

Is health insurance taxed?

When group health insurance benefits are provided for and paid for by an employer, there is no taxable event for the employee. Furthermore, when the policy pays the actual cost of medical care (as specified above), the insured will not have to report the benefits received as income. When an individual receives benefits under a health insurance policy, and those benefit payments are used to pay for the health care of the insured, no taxable event occurs. In this instance, the benefits are received tax-free.

What is the Grace Period Policy Provision?

When the policy includes a grace period, however, the policy will remain in force and will not lapse as long as the premium is paid within a specified number of days after the due date. A one-month grace period (which usually translates to a period of 31 days), is very common in health insurance policies.