BUSN380 Week 6 TCO 4 Chap 11 - Property & Motor Vehicle, Health, Disability & Long-Term Care
BUSN380 Week 6 TCO 4 Chap 11 - Property & Motor Vehicle, Health, Disability & Long-Term Care
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11 HEALTH, DISABILITY, AND LONGTERM CARE INSURANCE CHAPTER OVERVIEW Planning a health insurance program needs careful study because the protection should be shaped to the needs of the individual or the family. However, the task is simplified for many families because a foundation for their coverage is already provided by group health insurance at work. We begin the chapter by explaining why the costs of health insurance and health care have been increasing. Then we define health insurance and disability income insurance and explain their importance in financial planning. Next we analyze the benefits and limitations of the various types of health insurance coverage. Private sources of health insurance and health care are presented next, with a complete coverage of health maintenance organizations (HMOs). Then we discuss the sources of government health programs, such as Medicare and Medicaid. Finally, we explore the sources of disability income and offer suggestions on how to calculate disability income insurance requirements. LEARNING OBJECTIVES CHAPTER SUMMARY After studying this chapter, students will be able to: Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 111 My Life Explain why the costs of Health care costs have gone up faster than the rate of inflation. Obj. 1 health insurance and Among the reasons for high and rising health care costs are the health care are use of highpriced equipment and personnel, increases in the increasing. variety and frequency of treatments, innovative but costly treatment of some illnesses, thirdparty payments, too many hospital beds and too much duplication of facilities, and the lack of incentive to make the most economical use of health care services. My Define health insurance Health insurance is protection that provides payment of benefits Life and disability income for covered sickness or injury. Disability income insurance Obj. 2 insurance and explain protects your most valuable asset—your ability to earn income. their importance in financial planning. My Analyze the benefits and Five basic types of health insurance are available under group and Life limitations of the various individual policies: hospital expense insurance, surgical expense Obj. 3 types of health care insurance, physician’s expense insurance, major medical expense coverages. insurance, and comprehensive major medical insurance. The benefits and limitations of each policy differ. Ideally, you should get a basic plan and a major medical supplementary plan, or a comprehensive major medical policy that combines the values of both these plans in a single policy. LEARNING OBJECTIVES CHAPTER SUMMARY My Life Evaluate private sources Health insurance and health care are available from private Obj. 4 of health insurance and insurance companies, hospital and medical service plans such as health care. Blue Cross/Blue Shield, health maintenance organizations (HMOs), preferred provider organizations (PPOs), exclusive provider organizations (EPDs), pointofservice plans (POSs), home health care agencies, and employer selffunded health plans. My Life Appraise the sources of The federal government and state governments offer health Obj. 5 government health care coverage in accordance with laws that define the premiums and programs. benefits. Two wellknown government health programs are Medicare and Medicaid. My Life Recognize the need for Disability income insurance provides regular cash income as the Obj. 6 disability income result of an accident, illness, or pregnancy. Sources of disability insurance. income insurance include the employer, Social Security, workers’ compensation, the Veterans administration, the federal and state governments, unions, and private insurance. 112 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. INTRODUCTORY ACTIVITIES Point out the learning objectives (p. 338) in an effort to highlight the key points in the chapter. Ask students to comment on the My Life Scenario for the chapter (p. 338). Ask students to share experiences they have had with health care and medical insurance. Discuss methods that can be used by employers and employees to reduce the costs of medical insurance. Invite a human resources director from a local company to describe the health insurance coverage offered to company employees. CHAPTER 11 OUTLINE I. Health Care Costs A. High Medical Costs 1. Rapid Increase in Medical Expenditures 2. High Administrative Costs 3. Americans Without Insurance Coverage B. Why Does Health Care Cost So Much? C. What Is Being Done About the High Costs of Health Care? D. What Can You Do to Reduce Health Care Costs? II. Health Care Insurance and Financial Planning A. What Is Health Insurance? B. Group Health Insurance Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 113 C. Individual Health Insurance D. Supplementing Your Group Insurance E. Medical Coverage and Divorce III. Types of Health Insurance Coverages A. Hospital Expense Insurance B. Surgical Expense Insurance C. Physician Expense Insurance D. Major Medical Expense Insurance E. Comprehensive Major Medical Insurance F. Hospital Indemnity Policies G. Dental Expense Insurance H. Vision Care Insurance I. Other Insurance Policies J. Long Term Care Insurance 114 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. K. Major Provisions in a Health Insurance Policy 1. Eligibility 2. Assigned Benefits 3. Internal Limits 4. Copayment 5. Service Benefits 6. Benefit Limits 7. Exclusions and Limitations 8. Coordination of Benefits 9. Guaranteed Renewable 10. Cancellation and Termination L. Which Coverage Should You Choose? M. Health Insurance TradeOffs 1. Reimbursement versus Indemnity 2. Inside Limits versus Aggregate Limits 3. Deductibles and Coinsurance 4. OutofPocket Limits 5. Benefits Based on Reasonable and Customary Charges N. Health Information Online IV. Private Sources of Health Insurance and Health Care A. Private Insurance Companies B. Hospital and Medical Service Plans C. Health Maintenance Organizations (HMOs) D. Preferred Provider Organizations (PPOs) E. Home Health Agencies F. Employer SelfFunded Health Plans V. Government Health Care Programs A. Medicare B. Mending Medicare C. What Is Not Covered By Medicare? D. Medigap E. Medicaid F. Fight Against Medicare/Medicaid Fraud and Abuse G. Government Consumer Health Information Web Sites 1. Healthfinder 2. Medlineplus 3. NIH Health Information Page Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 115 VI. Disability Income Insurance A. Definition of Disability B. Disability Insurance TradeOffs 1. Waiting or Elimination Period 2. Duration of Benefits 3. Amount of Benefits 4. Accident and Sickness Coverage 5. Guaranteed Renewability C. Sources of Disability Income 1. Employer 2. Social Security 3. Workers’ Compensation D. Determining Your Disability Income Insurance Requirement 116 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 117 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions Health insurance is one way in which people protect Transparency Master 111 themselves against economic losses due to illness, shows how to reduce health care costs. accident, or disability. Use PPT slides 113 through I. HEALTH CARE COSTS (p. 339) 118 The soaring costs of medical care have forced Current Example: Wrangling employers to retain the services of cost containment Over ‘Reasonable’ Fees; It’s noholdsbarred battle between or utilization firms. health insurers and hospitals, with customers caught in the High Medical Costs (p. 339) niddle, Chad Terhume, Brian Rapid increase in medical expenditures Grow, Business Week March 3, High administrative costs 2008 i4073 p.28. Americans without insurance coverage Discussion Question: What factors have influenced the cost Why Does Health Care Cost So Much? (p. 341) of health care and medical services in our society? The high and rising costs of health care are attributable to many factors. Because third parties— Use PPT slide 115 and 116. private health insurers and government—pay so much Current Example: Is Your Kid of the nation’s health care bill, hospitals, doctors, and Covered? Insurers make big patients too often lack the incentive to make the most profits from college students, economical use of health care services. but some families are left with hugh bills, Ben Elgin, Jessica What Is Being Done About the High Costs of Health SilverGreenberg, Business Week May 19, 2008 i4084 p. Care? (p. 342) 41. Concerned groups such as employers, labor unions, Use PPT slide 117. health insurers, health care professionals, and Text Highlight: Discuss the consumers have undertaken a wide range of effect of employer spending for innovative activities to contain the costs of health medical benefits on personal care. financial planning and growth of the economy. Current Example: A Price War in Health Insurance; After enduring years of premium hikes, small business is being courted by carriers eager to What Can You Do to Reduce Health Care Costs? make deals, Jopseph Weber, Business Week Jan. 14, 2008 (p. 342) i4066 p. 36. The best way to avoid the high cost of sickness is to Exercise: Create a list of stay well. Learn to minimize, through intelligent self actions that can be taken by the following groups to keep health care, the need for medical attention. care costs down: individuals; health care providers; insurance companies; employers; and government agencies. Assignment: Research through library resources and discuss 118 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. CHAPTER 11 LECTURE OUTLINE Instructional Suggestions with company officials, methods that are being used to minimize medical costs. Current Example: Health Insurance Forum: Visit www.insure.com/health/forum. Concept Check 111 (p. 342) II. HEALTH INSURANCE AND FINANCIAL Use PPT slides 119 through PLANNING (p. 343) 1111. The number of Americans without basic health Exercise: Ask students about special types of health insurance insurance has been growing. coverage they or their family members have. What Is Health Insurance? (p. 343) Discussion Question: What is Health insurance is a form of protection whose the relationship between health primary purpose is to alleviate the financial burdens insurance coverage and other suffered by individuals because of illness or injury. aspects of financial planning? Health insurance includes both medical expense Assignment: Talk to others insurance and disability income insurance. about the impact of their health Group Health Insurance (p. 344) insurance on other financial decisions. Also, obtain Group plans comprise more than 85 percent of all the information on the types of health insurance coverage they health insurance issued by life insurance companies. have. The protection provided by group insurance varies Assignment: Have students from plan to plan. contact an insurance agent to obtain cost information for an Individual Health Insurance (p. 344) individual health insurance policy. Individual health insurance covers either one person or a family. Coverage and cost vary from company to Current Example: company. Outsourcing the Patients; More Supplementing Your Group Insurance (p. 344) U.S. health insurers are slashing costs by sending policyholders A sign that your group coverage needs supplementing overseas for pricey procedures, Bruce Einhorn, Catherine Arnst, would be its failure to provide benefits for the major Business Week March 24, 2008 portion of your medical care bills, mainly hospital, i4076 p. 36. doctor, and surgical charges. Supplementary Resource: In supplementing your group health insurance, Talk to someone in a personnel consider the health insurance benefits that your office of a business to obtain information on the health employersponsored plan provides to your spouse. insurance provided as an Most group policy contracts have a coordination of employee benefit. benefits (COB) provision. Discussion Question: Should employers be required to Medical Coverage and Divorce (p. 345) provide employees some type of Coverage under a former spouse’s medical plan can health insurance coverage, even be continued for 36 months. if it is a group plan, with each employee paying his or her full Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 119 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions Premiums can run as high as $4,000 annually. premium? The COBRA of 1986 requires many employers to Concept Check 112 (p. 345) offer employees group health insurance. III. TYPES OF HEALTH INSURANCE COVERAGE Use PPT slides 1112 through 1117 (p. 345) Transparency Master 112 Several types of health insurance coverage are provides students with an available under group and individual policies. overview of the various types of health insurance coverages. Hospital Expense Insurance (p. 346) Assignment: Have students talk Hospital expense insurance pays part or all of to several people to determine the type of medical insurance hospital bills for room, board, and other charges. used most frequently. Surgical Expense Insurance (p. 346) Exercise: Have students create situations in which certain types Surgical expense insurance pays part or all of the of health insurance coverage surgeon’s fees for an operation. would be used. Physician Expense Insurance (p. 346) Discussion Question: Which is more important to an individual Physician expense insurance helps pay for or family: basic health insurance coverage for everyday physician’s care that does not involve surgery. expenses and most types of surgery or major medical Major Medical Expense Insurance (p. 346) insurance? Major medical expense insurance protects against Exercise: Have students create the large expenses of a serious injury or a long illness. a list of specialized insurance coverage available to Comprehensive Major Medical Insurance (p. 346) individuals or through Comprehensive major medical insurance is a type of employee benefit programs. Text Highlight: Point out the major medical insurance that has a very low deductible amount and is offered without any major features and weaknesses of hospital indemnity policies. separate basic plan. (p. 347) Hospital Indemnity Policies (p. 347) Current Example: Income and age tied to lack of dental A hospital indemnity policy pays benefits only when benefits, poor oral health. Poor you are hospitalized, but these benefits are paid to you children suffer twice as many in cash. cavities as more affluent kids, and a quarter of them don’t get Dental Expense Insurance (p. 347) to the dentist before age 5. Visit this Web site: Dental expense insurance provides reimbursement for www.insure.com/health/dentalh the expenses of dental services and supplies. ealth600.html. Text Highlight: Point out the Vision Care Insurance (p. 347) major provisions in a health 1110 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. CHAPTER 11 LECTURE OUTLINE Instructional Suggestions A recent development in health care coverage has been insurance policy on page 350. vision care insurance. Other Insurance Policies (p. 347) Assignment: Have students collect and analyze ads for Dread disease and cancer policies, which are usually various types of mail order solicited through the mail, in newspapers and health insurance plans. magazines, or by doortodoor salespeople working on commission are notoriously poor values. Use PPT slides 1114 LongTerm Care Insurance (p. 347) Text Highlight: Point out “Financial Planning for Life’s Longterm care is dayin, dayout help that you Situations,” box on longterm could need if you ever have an illness or disability care insurance. (p. 349) that lasts a long time and leaves you unable to care for yourself. Assignment: Have students prepare a list of provisions in a Major Provisions in a Health Insurance Policy (p. health insurance that are important to them. 350) All health insurance policies have certain provisions in common. They are: Eligibility Assigned benefits Inside limits Service benefits Benefit limits Exclusions and limitations Coordination of benefits Guaranteed renewable Cancellation and termination Which Coverage Should You Choose? (p. 351) Text Reference: Use Sheet #51 for assessing current and needed Ideally, you should get a basic plan and a major health care insurance. medical supplementary plan. Or you should get a comprehensive major medical policy that combines the values of both these plans in a single policy. Health Insurance TradeOffs (p. 351) The benefits of health insurance policies differ, so consider the following: Reimbursement versus indemnity Inside limits versus aggregate limits Deductibles and coinsurance Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 1111 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions Outofpocket limit Benefits based on reasonable and customer charges Concept Check 113 (p. 353) Health Information Online (p. 352) The best medical Web sites. IV. PRIVATE SOURCES OF HEALTH INSURANCE Use PPT slide 1118 through AND HEALTH CARE (p. 353) 1121. Health insurance is available from private insurance Text Highlight: Point out the features of Blue Cross and Blue companies, from service plans, from HMOs, from Shield plans on page 354. PPOs, from government programs, and from fraternal organizations and trade unions. Discussion Question: Do HMOs contribute to the Private Insurance Companies (p. 354) reduction of medical costs? Most private insurance companies sell health Current Example: ‘Medical Travel is Going to be Part of the insurance policies to employers, which in turn offer Solution’; David Boucher of the benefits to employees and their dependents, as Blue Cross & Blue Shield of fringe benefits. South Carolina is forging alliances that allow members to Hospital and Medical Service Plans (p. 354) go abroad for surgery and other procedures, (Asia Health) (Blue Blue Cross and Blue Shield are statewide Cross and Blue Shield organizations similar to commercial health insurance Association) Bruce Einhorn, companies. Business Week Online March 18, 2008 pNA. Blue Cross plans provide hospital care benefits on essentially a “service type” basis. Current Example: HMO’s Blue Shield plans provide benefits for surgical Unwelcome Diagnosis, The Wall Street turning against the and medical services performed by physicians. sector, Business Week Online, Managed care refers to prepaid health plans that March 12, 2008. provide comprehensive health care to members. Use PPT slide 1119. Health Maintenance Organizations (HMOs) (p. 354) Exercise: Develop a list of advantages and disadvantages A health maintenance organization (HMO) is a of HMO membership. health insurance plan that directly employs or Assignment: Compare the contracts with selected physicians, surgeons, dentists, services offered by HMOs in and optometrists to provide you with health care your community. Survey HMO services in exchange for a fixed, prepaid monthly members to obtain information on the positive and negative premium. aspects of membership. Preferred Provider Organizations (p. 356) Text Highlight: Use the “Financial Planning for Life’s Preferred provider organizations (PPOs) combine Situations” feature on page 352 the best elements of the feeforservice and HMO to highlight some of the best systems. PPOs provide the services of doctors and medical web sites. hospitals at discount rates or give breaks in 1112 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. CHAPTER 11 LECTURE OUTLINE Instructional Suggestions copayments and deductibles. Exclusive provider organizations (EPOs) are reimbursed on a feeforservice basis according to a negotiated discount or fee schedule. Point of service plans (POSs) sometimes called HMOPPO hybrid or openended HMOs, combine characteristics of both HMOs and PPOs. The evolution of health care plans will continue. Home Health Care Agencies (p. 356) Discussion Question: How do health associations and home Home health care providers furnish and are health agencies differ from responsible for the supervision and management of HMOs? preventive medical care in a home setting in Supplementary Resource: accordance with a medical order. Request a copy of Alternatives Employer SelfFunded Health Plans (p. 357) to Hospitalization from Aetna Life and Casualty Co., Corporate Communications, Certain types of health insurance coverage are made 151 Farmington Ave., Hartford, available by plans that employers, labor unions, CT 06156. fraternal societies, or communities administer. Use PPT slide 1121. Usually, these groups provide the amount of protection that a specific group of people desires and can afford. New Health Care Accounts (p. 357) Health Savings Accounts (HSAs), which Congress Concept Check 114 (p. 357). authorized in 2003, are the newest addition to health insurance available to Americans. . V. GOVERNMENT HEALTH CARE PROGRAMS (p. 358) Use PPT slide 1122 and 11 23. Two sources of government health insurance are Discussion Question: Should Medicare and Medicaid. the coverage provided by Medicare be expanded? Medicare (p. 358) Assignment: Talk to several Medicare is a federal health insurance program for people covered by Medicare people 65 or older, people of any age with permanent and Medicaid to obtain kidney failure, and certain disabled people. information on the coverage provided and the difficulties Medicare has four parts: sometimes faced. Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 1113 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions Hospital insurance benefits (Part A) helps pay for Exercise: Create a list of inpatient hospital care, inpatient care in a skilled situations that would be nursing facility, home health care, and hospice methods that can be used to cover some of the items not care. covered by Medicare. Medical insurance benefits (Part B) helps pay for doctor’s services and for a variety of other Current Example: Health Care: Not So RecessionProof; medical services and supplies that are not covered The medical industry’s footing by hospital insurance. becomes shaky in tough The Balanced Budget Act of 1997 created the new economic times. For starters, folks could opt for mortgage Medicare + Choice program. The Medicare Prescription, Drug Improvement and payments over health insurance, Modernization Act of 2003 renamed the Medicare (Technology) Catherine Arnst, + Choice program as Medicare Advantage (Part Business Week Online March 25, 2008 pNA. C). This new plan may be less expensive than the Text Highlight: Point out the original Medicare. The new law also provides Medicare beneficiaries “Financial Planning for Life’s Situations” feature that provides with prescription drug discounts (Part D) some consumer tips on health beginning January 1, 2006. and disability insurance. Mending Medicare. Without changes, the nation’s (p. 364) multibilliondollarayear system for providing health care to seniors is projected to go broke in Supplementary Resources: A 2008. Brief Explanation of Medicare, Social Security Administration, What is not covered by Medicare? Medicare does not cover some medical expenses at all. 6401 Security Blvd., Baltimore, MD 21235, and How to Cover Medigap (p. 361) the Gaps in Medicare, American Institute for Medigap insurance, intended to supplement Economic Research, Division Medicare, is not sold or serviced by the federal Street, Great Barrington, MA 01230. government or state governments. Many private insurance companies sell medigap insurance. Do you need medigap insurance? If you are a Medicare beneficiary enrolled in a prepayment plan, such as an HMO, you may not need a Medicare supplement policy. Lowincome people who are eligible for Medicaid generally do not need medigap insurance. Medicaid (p. 362) Title XIX of the Social Security Act provides for a program of medical assistance to certain lowincome individuals and families. Medicaid is administered by each state within certain broad federal requirements and guidelines. Many members of the Medicaid population are also covered by Medicare. 1114 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. CHAPTER 11 LECTURE OUTLINE Instructional Suggestions Fight Against Medicare/Medicaid Fraud and Abuse (p. 363) About 70 percent of consumers believe the Medicare program would not go broke if fraud and abuse were eliminated. In 1997, President Clinton introduced the Medicare/Medicaid AntiWaste, Fraud and Abuse Act, which established tough new requirements for health care providers. Government Consumer Health Information Web Sites (p. 364) Use PPT Slide 1124. Major Health and Human Services health information Web sites include: Healthfinder links to more than 1,250 Web sites. Medline PLUS is coordinated by the National Library of Medicine. NIH Health Information page provides a single access point to the consumer information resources of the National Institutes of Health. Concept Check 115: (p. 365). Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 1115 CHAPTER 11 LECTURE OUTLINE Instructional Suggestions VI. DISABILITY INCOME INSURANCE (p. 365) Use PPT slides 1125 through Disability income insurance benefits provide regular 1127. cash income lost by employees as the result of an Discussion Question: Why is accident, illness, or pregnancy. disability income insurance a Generally disability income policies are divided into frequently overlooked component of financial shortterm and longterm policies. planning? Definition of Disability (p. 366) Text Highlight: Point out the basic purpose and provisions of There are different definitions of disability. Some disability income insurance. policies define it as simply being unable to do your (p. 365) regular work, while others are stricter. Assignment: Survey several Disability Insurance Trade Offs (p. 366) people to determine if they have disability income insurance. There are important tradeoffs to consider in buying Also, compare costs of this type disability income insurance. of coverage with several different insurance companies. Waiting or elimination period Duration of benefits Amount of benefits Accident and sickness coverage Guaranteed renewability Sources of Disability Income (p. 367) Use PPT slide 1127. There are three major sources of disability income. Concept Check 116 (p. 370) Employer Social Security Workers’ compensation The availability and extent of these and other disability income sources vary widely in different parts of the country. Determining Your Disability Income Insurance Requirement (p. 368) If the sum of your disability benefits approaches your aftertax income, you don’t need disability income insurance. If Social Security and other disability benefits are not sufficient to support your family, you may want to consider buying disability income insurance to make up the difference. 1116 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. CONCLUDING ACTIVITIES Point out the chapter summary of objectives (p. 370) and key terms in the text margin. Discuss selected endofchapter Financial Planning Problems, Financial Planning Activities, Financial Planning Case, and Digital Case. Have students do one or more of the endofchapter activities (p. 372) Use the Chapter Quiz in the Instructor’s Manual. Refer students to activities and readings in the Student Resource Manual for Chapter 11. WORKSHEETS FROM PERSONAL FINANCIAL PLANNER FOR USE WITH CHAPTER 11 Sheet 51 Assessing Current and Needed Health Care Insurance Sheet 52 Disability Income Insurance Needs CHAPTER 11 QUIZ ANSWERS TrueFalse Multiple Choice 1. T (p. 339) 6. D (p. 339) 2. T (p. 346) 7. B (p. 346) 3. F (p. 347) 8. A (p. 347) 4. T (p. 354) 9. C (p. 363) 5. F (p. 365) 10. A (p. 358) Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 1117 Name__________________________________________ Date_____________________________ CHAPTER 11 QUIZ TRUEFALSE 1. Affordable health care has become one of the most important social issues of our time. 2. Hospital expense insurance pays part or all of hospital bills for room, board, and other charges. 3. Dread disease and cancer insurance policies are usually good values for most individuals. 4. Blue Cross and Blue Shield are statewide organizations similar to commercial health insurance companies. 5. Disability income insurance benefits provide for the full replacement of income lost by employees as the result of an accident, illness, or pregnancy. MULTIPLE CHOICE _____6. In 2007, health care costs were estimated at a. $900 million b. $0.5 trillion c. $1.0 trillion d. over $2.0 trillion _____7. Which type of health insurance pays part or all of the surgeon’s fee for an operation? a. Hospital expense b. Surgical expense c. Physician’s expense d. Major medical expense _____8. What form of insurance is growing faster than any other form of insurance in the country? a. Longterm care b. Vision care c. Dread disease d. Dental expense _____9. Which health insurance plan is administered by each state within certain broad federal requirements and guidelines? a. Medicare b. Blue Cross c. Medicaid d. Blue Cross _____10. Which health program is administered by the Centers for Medicare and Medicaid Services? a. Medicare b. Blue Cross c. Medicaid 1118 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. d. Blue Cross Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 1119 SUPPLEMENTARY LECTURE: 111 Supplementary Lecture 11–1 BusinessWeek Business Week, March 24, 2008 i4076 p36 OUTSOURCING THE PATIENTS; More U.S. health insurers are slashing costs by sending policyholders overseas for pricey procedures. Bruce Einhorn; Catherine Arnst. Full Text: COPYRIGHT 2008 The McGrawHill Companies, Inc. Byline: Bruce Einhorn, with Catherine Arnst For years, Americans have been traveling abroad to save money on elective procedures or dental work. David Boucher, 49, doesn’t fit the usual profile for such medical tourists. An assistant vicepresident of healthcare services at Blue Cross & Blue Shield of South Carolina, he has ample health benefits. But Boucher recently chose to have a colonoscopy at Bumrungrad International Hospital in Bangkok, mainly to make a point about the expanding options available to Blue Cross customers. And his company happily picked up the $640 taba bargain by U.S. standards. Blue Cross and other insurers would like to see more policyholders traveling abroad for medical care. Since the start of the year, Boucher has signed alliances with seven overseas hospitals and hopes to add five more by yearend, including them all in coverage for his company’s 1.5 million members. As healthcare costs continue to rise in the U.S., “medical travel is going to be part of the solution,” he says. Yes, just like manufacturing facilities and call centers, health care is moving offshore. “All of the largest U.S. insurers are starting to educate themselves or are putting [offshore] programs in place,” says Jonathan Edelheit, president of the Medical Tourism Assn., an industry group formed just last year. Companies that selfinsure are also bombarding Edelheit’s group with requests for information. Getting covered employees to leave the U.S. won’t be that hard, says Edelheit. An insurance company could waive all deductibles and copays, offer to cover travel costs for the patient and family members, even throw in a cash incentive, and still save tens of thousands of dollars. After all, a heart procedure that costs $100,000 in the U.S. runs only $10,000 to $20,000 at some of the best private hospitals in Asia. And the quality of care? Foreign hospitals in such arrangements are typically approved by Joint Commission International, part of the same nonprofit organization that accredits American hospitals. 1120 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. Blue Cross took the lead in medical offshoring when it formed its first partnership, with Bumrungrad Hospital, in February. Since then the insurer has signed similar pacts with the Parkway Group Healthcare, owner of three hospitals in Singapore, and hospitals in Turkey, Ireland, and Costa Rica. Three members of India’s Apollo Hospitals Group are also joining the network. And another large Indian chain, Wockhardt Hospitals, is talking with U.S. insurers as well. “Americans haven’t come to grips with having their heart surgery in Thailand,” says Curtis Schroeder, the American CEO of Bumrungrad. “But that will change.” The shift is sure to leave some policyholders disgruntled, of course. Offering international coverage might make it easier for employers to limit benefits at home, for instance, by raising the deductibles on U.S.based procedures. It’s also extremely difficult for patients to sue for malpractice in most Asian countries. Bumrungrad has offices for marketing and promotion in 20 countries, but not the U.S.in part because having a U.S. office would open the door to potential liability, hospital officials say. So it will take a while for the trickle of insured U.S. patients in Asia to become a torrent. But over time, for policyholders and payers alike, the price may be hard to resist. COSTS OF A HEART BYPASS OPERATION Why insurers are partnering with hospitals overseas U.S.: $130,000 Singapore: 18,500 Thailand: 11,000 India: 10,000 Data: Thai Public Health Ministry Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 1121 SUPPLEMENTARY LECTURE: 112 BusinessWeek Business Week, Jan 14, 2008 i4066 p36 A PRICE WAR IN HEALTH INSURANCE; After enduring years of premium hikes, small business is being courted by carriers eager to make deals. Joseph Weber. Full Text: COPYRIGHT 2008 The McGrawHill Companies, Inc. Byline: Joseph Weber When United Healthcare told American Printing House for the Blind that its health insurance bill would jump 49.9% in 2008, Chief Financial Officer William G. Beavin decided to shop around. He settled on Humana, which offered a less generous plan that delivered a 17% rise. That’s steep, and will cost the Louisvillebased publisher, which has 310 employees, about $1 million a year, but it’s manageable. “It’s nice to know you’ve got healthcare organizations that are willing to work with you,” says Beavin. “It’s not a takeitorleaveit situation.” Health insurance has always been pricey for small and midsize businesses. But after years of extracting hefty increases from smaller corporate customers, some insurers are showing more flexibility. Why? With the overall market for health insurance flat, carriers are battling to steal market share from one another. “There’s a price war going on now,” says Blaine Bos, a partner at consulting firm Mercer. Some players have targeted UnitedHealth Group, the secondlargest U.S. insurer, which has been hit by negative publicity from a stock options backdating scandal involving former Chief Executive William W. McGuire. UnitedHealth expects to lose more than 500,000 customers out of 26 million in the first quarter of 2008, partly due to a merger with PacifiCare. The Californiabased smallbiz insurer has been dogged by customer service problems. UnitedHealth is willing to negotiateit ultimately came close to matching Humana’s offer to Beavinbut it is reluctant to lower rates to defend market share. Says Kenneth A. Burdick, chief executive of the company’s UnitedHealthcare unit: “We’re in this for the long haul and not to get ourselves into some kind of short term pricing approach.” Humana, Aetna, and Cigna are in it for the long haul, too. They want to snare more of the so called fully insured market, in which small and midsize companies buy group policies to cover employees. In contrast, big corporations typically insure themselvespaying medical bills and assuming financial risk for coverageand hire insurance carriers to run their plans. The fully insured market is far bigger and more lucrative, but going after it was less of a priority when the average annual growth in healthcare premiums industrywide clocked in at 13.9% in 2003. Last year it was 6.1%the lowest since 1999. OPPORTUNITY KNOCKING 1122 Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. Insurers also aim to lure business away from local Blue Cross & Blue Shield plans. Right now, such plans dominate the fully insured market and some are demanding steep increases for coverage. Executives at Cigna and Humana say the “very competitive” conditions create opportunity. After years of serving primarily the bigcompany market, Cigna plans in 2008 to expand more into the individual and fully insured market. “We need to be pricecompetitive,” says Jon Rubin, chief financial officer of Cigna HealthCare. “We’re not the lowest in the market, but we’re within the range of price competition.” Insurers could sure use the boost the new business would provide. Even the bestrun carriers, such as the nation’s biggest health insurer, WellPoint, have seen their stocks pretty much flat since late 2005. The shares of UnitedHealth, where ousted CEO McGuire in December agreed to return some $600 million in compensation to settle civil and federal claims, trade at about 57. That’s nearly 12% below late2005 levels. Weep not for the insurers, though. Premium growth still outpaces growth in workers’ income and inflation. But at least small and midsize companies can now find carriers willing to fight for their business. “The competition is greater this year than last,” says WellPoint commercial business unit chief Kenneth R. Goulet. Copyright © 2009 The McGrawHill Companies, Inc. All rights reserved. 1123 SUPPLEMENTARY ACTIVITY Health Insurance Crossword Puzzle 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
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