Chapter 15 Individual Health Insurance Coverages Agenda 2 Health - PDF document

Chapter 15 Individual Health Insurance Coverages Agenda 2  Health Care Problems in the US  Individual Health Insurance Coverages  Hospital-Surgical Insurance  Major Medical Insurance  Health Savings Accounts  Long-term Care Insurance  Disability-Income Insurance  Individual Medical Expense Contractual Provisions  Shopping for Health Insurance Health Care Problems in the US 3  Problem 1: Rising Health Care Expenditures  Health care expenditures in the US have increased substantially over time and are outstripping the growth in the economy  Group health insurance premiums are rising faster than the rate of inflation  Premiums increase with cost of health care  Factors affecting health care costs include:  Rising outpatient and inpatient costs  Rising cost of prescription drugs  Rising cost of physician services 1

Increases in Health Insurance Premiums Compared to Other Indicators, 1988–2005 4 Health Expenditures and Income OECD 2008 5 6 2

Health Care Problems in the US 7  Problem 2: Many people do not have health insurance coverage  45.7 million people, or 15.3% of the US population had no health insurance coverage in 2007  Groups with large number of uninsured include:  Foreign born  Hispanics, Blacks, and Asians  Young adults  Low income households Health Care Problems in the US 8  Many people are uninsured because the coverage is not affordable  Some people are denied coverage  Many people believe health insurance is not needed  Many low income people who are eligible for Medicaid are not aware they are eligible Reasons for Not Having Health Insurance 9 3

More Than Half of Americans Say Family Skimped on Medical Care Because of Cost in the Past Year; Worries About Affordability and Availability of Care Rise Health Care Problems in the US 11  Problem 3: Uneven Quality of Medical Care  The quality of medical care varies widely  There is a “quality gap” in the US; many people do not receive the most effective care  Many doctors are not following the recommended guidelines in treating common ailments  Approx 55% follow “clinical best practice” Estimated Deaths Attributable to Failure to Deliver Recommended Care: Selected Measures/Conditions (U.S. population) 12 Recommended Care: Selected Measures/Conditions (U.S. population) 4

Health Care Problems in the US 13  Problem 4: Waste and Inefficiency  The administrative costs of delivering health insurance benefits are excessively high  Administration of health insurance system accounts for about 20% of US excess health care expenditures Individual Health Insurance Coverages 14  Individual medical expense plans are purchased by:  People who are not employed  Retired workers  College students  Common forms of individual coverage include:  Hospital-surgical insurance  Major medical insurance  Health savings accounts  Long-term care insurance  Disability-income insurance Hospital-Surgical Insurance 15  Hospital-surgical insurance plans cover routine medical expenses  These plans are not widely used  Not designed to cover catastrophic losses  Maximum benefits per illness and lifetime aggregate limits are low  Most policies cover:  Hospital inpatient expenses  Miscellaneous hospital expenses, e.g., x-rays  Surgical expenses, covered two ways:  A scheduled approach, with a maximum per procedure  On the basis of reasonable and customary charges  Outpatient services, e.g., emergency treatment  Physicians’ visits for nonsurgical treatment 5

Major Medical Insurance 16  Major medical insurance is designed to pay a high proportion of the covered expenses of a catastrophic illness or injury  Plans are characterized by:  Broad coverage of reasonable medical expenses, high limits  A deductible (typically calendar year)  A calendar-year deductible is an aggregate deductible that has to be satisfied only once during the calendar year  A family deductible specifies that medical expenses for all family members are accumulated to satisfy the deductible  Under a common-accident provision, only one deductible has to be satisfied if two or more family members are injured in a common accident Major Medical Insurance 17  A coinsurance provision requires the insured to pay a certain percentage (typically 20-25 %) of eligible medical expenses in excess of the deductible  Purpose is to reduce premiums and prevent overutilization of policy benefits  The insured’s total out-of-pocket spending is limited by a stop-loss limit, after which the insurer pays 100% of eligible expenses  Common exclusions include cosmetic surgery and expenses covered by workers compensation  Plans may have internal limits for some types of expenses  Some plans have incorporated elements of managed care Health Savings Accounts 18  A health savings account (HSA) is a tax exempt account established exclusively for the purpose of paying qualified medical expenses  Must be covered under a high-deductible health plan to cover catastrophic medical bills  Can withdraw money from the HSA tax-free for medical costs  Limits on contributions and annual out-of-pocket expenses  An HSA investment account in a qualified plan received favorable tax treatment  Participants pay premiums with before-tax dollars  Investment earnings accumulate tax-free 6

Affordable Health Care for America Act of 2010 19  Cost $940B over 10 years  Reduce deficit by $143B over 10 yrs., $1.3T over 20 yrs.  Expand coverage to 32M uninsured  Individuals purchase through federal/state exchanges  Small businesses purchase through second state exchange  Subsidies for “low income”  Insurance reform  Cannot deny for pre-existing condition  Children  Adults starts 2014 Affordable Health Care for America Act of 2010 20  Individual and Employer “Mandates”  Individuals must purchase ($695 fine)  Employers must provide ( ≥ 50, $2000/person fine)  Medicare/Medicaid Reform  Close “donut hole” eventually  Discount on brand name drugs (2011)  Expand Medicaid eligibility (Fed subsidy)  Taxes  Medicare tax expands to all income  Tax on “Cadillac” plans (worth ≥ $27500) Affordable Health Care for America Act of 2010 21  Health Insurance Exchanges  New “insurance marketplace”  State and/or Federal 7

Affordable Health Care for America Act of 2010 22  Guarantee Issue  prohibits insurers from denying coverage to individuals due to pre- existing conditions,  partial community rating requires insurers to offer the same premium price to all applicants of the same age and geographical location without regard to gender or most pre-existing conditions  Medical Loss Ratio  80% on claims and quality improvment Affordable Health Care for America Act of 2010 23  Minimum coverage standards for health insurance policies  emergency services  hospitalization  maternity and newborn care  mental health and substance use disorder services  prescription drugs;  laboratory services  preventive and wellness services  chronic disease management  pediatric services Health Care Exchanges 24 Grey = Federal, Light Green = Joint, Dark Green = state 8

Affordable Health Care for America Act of 2010 25  Premium subsidies  Individuals and families whose incomes are between 100% and 400% of the federal poverty level will receive subsidies on a sliding scale if they purchase insurance via an exchange.  Up to $45,960 for an individual  Up to or $94,200 for a family of four Affordable Health Care for America Act of 2010 26  Medicaid eligibility expanded  Includes individuals and families with incomes up to 133% of the federal poverty level  includes adults without disabilities  Includes adults without dependent children.  States may opt out Medicaid Expansion 27 Grey = No expansion Light Green = Debating Expansion Dark Green = Expansion 9

Long-Term Care Insurance 28  Long-term care insurance pays a daily or monthly benefit for medical or custodial care received in a nursing facility, in a hospital, or at home  About 44% of people attaining age 65 are expected to enter a nursing home at least once during their lifetime  Plans come in three main forms:  A facility-only policy  A home health care policy  A comprehensive policy Affordable Health Care for America Act of 2010 29  Effects  11M additional insured  Smaller increases in premiums, health expenditures  Down from 5%/year to 2%/year  Long term impact  CBO 2007 – health care = 18% of GPD  CBO 2014 – health care = 13% pf GDP Long Term Care Insurance 30  Most policies are reimbursement policies, which reimburse for actual charges up to a daily limit  Daily benefits range from $50 - $300 or more  In a qualified plan, a benefit trigger must be met to receive benefits. Either,  The insured is unable to perform a certain number of activities of daily living (ADLs), or  The insured needs substantial supervision to be protected against threats to health and safety because of a severe cognitive impairment  Policies are guaranteed renewable  Coverage is expensive  Most have non-forfeiture benefit 10