 Personal Finance PowerPoint Presentation Health Insurance Overview Get ready to get financially fit by practicing personal finance. Note that our insurance planning is a long-term financial strategy where we're going to use the adage of measure twice cut once. We're going to go through a formal process looking something like this. We're going to set the goals. We're going to develop a plan. We're going to put the plan into action, review the results, and then we'll periodically go through that process again. Most of this information can be found at Investopedia. What is health insurance? Which you can find online. Take a look at the references or resources. Continue your research from there. This is by Julia Kagan, updated March 6, 2022. First, what is health insurance? Health insurance is a contract that requires an insurer to pay some or all of a person's health care costs in exchange for a premium. Clearly, it's a form of insurance. It's a form of risk mitigation, but health insurance in many ways is more complicated than other types of insurance. In other words, when we looked at, say, property insurance, we're typically insuring against an event that may happen in the future, but which we're hoping doesn't happen in the future. For example, we're hoping a car accident doesn't actually happen, or we're hoping our home doesn't actually burn down, but if it were to happen, it would be financially catastrophic as well as possibly in other ways as well. Therefore, we're going to ensure mitigating the risk for it. Health insurance has a similar component to it in that clearly we could have an injury that could be financially catastrophic, a sickness, an illness that we would want to be insuring against in a similar fashion, but it also has due import to legislation that tries to basically want this preventative care involved. It's got more and more of that preventative type of care stuff in it. So that makes it good to some degree, but also more complicated to some degree when we're trying to figure out what we're actually doing with the insurance and what the costs and the benefits will be with regards to the premium versus the benefits that we will be getting from it. So more specifically, health insurance typically pays for medical, surgical, prescription drugs and sometimes dental expenses incurred by the insurance. So those medical kind of components that we want to determine which ones are covered, which ones are not for the type of health insurance plan that we're putting in place for our risk mitigation strategy. Health insurance can reimburse the insured for expenses incurred from illness or injury or pay for the care provider directly. So in other words, depending on the circumstances and the insurer, it might be reimbursing us for expenses we have or paying the care provider directly for the medical care. It often includes an employer benefit packages as a means of enticing quality employees with premiums partially covered by the employer, but often also deducted from an employee paycheck. In other words, it's traditionally been the case that the health insurance has been tied to our employers, which I think kind of works better back a long time ago because it used to be that many people worked for the same employer for a long period of time, possibly their whole life and you had a one income household and then it worked quite well to have the insurance possibly tied to a benefit program from the employer. It gets a little bit confusing these days because people are moving around, might have multiple jobs and so on and they could have two income households, which kind of complicates the decision for what the insurance is going to be. But that's still kind of how it is because there's tax benefits for that to be the case. So the first place we often look to see is insurance available to us and where we might be able to get the best deal or most benefit from it would be our employer to see if that would be available there. So the cost of health insurance premiums is deductible to the payer and the benefits received are tax free with certain exceptions for S corporation employees. So in other words, we have some benefits that help it to be the case in terms of tax benefits that the employer might be providing the health insurance benefits. So how health insurance works. Health insurance can be tricky to navigate. Managed care insurance plans require policyholders to receive care from a network of designated health care providers for the highest level of coverage. So we've got to make sure that when we're doing our health care that we're working within whatever system we have signed up within the contract of the health insurance that we have set up there will typically be some kind of network which will give us some types of limitations to the health care that we can seek under that particular plan. So if patients seek care outside the network they must pay a higher percentage of the cost. So if you go outside the network, they're going to penalize you for it because they want to keep you in the network. In some cases the insurance company may even refuse payment outright for services obtained out of network. Many management care plans, for example, health maintenance organizations those are the HMOs and point of service plans the POS require patients to choose a primary care physician who oversees the patient's cares makes recommendations about treatment and provides referrals to medical specialists. So in that case that type of system is basically saying we want you to have this one individual that's going to be the driver of where you're going to go what kind of care you're going to have or at least the options that are available to you. You go there first, they give you the options they're going to point you to specialist as needed which you would think would be all within the network of providers that they're part of preferred provider organizations those are the PPO's by contrast don't require referrals but do have lower rates for using in-network practitioners so we could dive into the differences between the HMO's and the PPO's which we might do in a future presentation insurance companies may also deny coverage for certain services that were obtained without pre-authorization in addition insurers may refuse payment for name brand drugs if a generic version or comparable medication is available at a lower cost so if you're doing something without the pre-authorization they might not like that and the huge disparity in terms of the costs of drugs could be there if there's going to be a generic version available as opposed to the name version possibly insurance companies taking that into consideration as well. All these rules should be stated in the material provided by the insurance company and should be carefully reviewed it's worth checking with employers or the company directly for incurring a major expense increasingly health insurance plans also have co-pays you've got these co-pays that you want to be considering which are a set of fees that planned subscribers must pay for services such as doctor visits prescription drugs and so on so note again with these insurance on the health insurance we're not just insurance often times for that catastrophic event meaning we're not just insurance against an illness that's going to be life threatening type of thing in a similar way as like we're insurance against a car accident or a storm for property insurance ensuring the home in that case we also have the preventative type of stuff in place where you might have this kind of co-pay situation with those we got the deductible that must be met before health insurance will cover or pay for a claim so in other kind of claims the deductible often times you think about as more of a traditional kind of insurance kind of component where if some catastrophe happened or some health emergency happened you would be paying the deductible before basically the insurance kind of kicks in so that's kind of a traditional type of insurance thing and co-insurance a percent of health care costs that the insured must pay even after they've met their deductible so you got that component as well in terms of the co-insurance and before they reach their out of pocket maximum for a given period so insurance plans with higher out of pocket costs generally have smaller monthly premiums than plans with low deductibles so clearly when you look at the interplay between these different components it would have the impact on the cost of the plans that you would basically expect in terms of these different kind of pros and cons in terms of the benefits that could be provided the deductibles and the costs and co-pays with regards to what you're paying for the plan in terms of the premium so when shopping for plans individuals must weigh the benefits of lower monthly costs against the potential risk of large out of pocket expenses in the case of a major illness or accident so we've got two kind of things that we're kind of measuring here we've got one if there's a major illness or something like that how much would I be covering and how much would the insurance kind of kick in and two with the day to day kind of or maybe not day to day but the more common preventative type of stuff how much am I paying with that kind of stuff and how much do I need the preventative type of stuff at this point in time how important is that to me we also have the high deductible health insurance plans the HDHPs so we've talked about this idea that health insurance has the kind of traditional thought of insurance where your insurance again you're insuring against a catastrophic event that happens sometime in the future such as for property damage like your house burning down a comparable illness for health insurance so that's like normal insurance that you would want to get to have that preventative item and then you've got those other things that are the preventative care which has the more insurance expensive policies possibly the more preventative care coverage you would have in order to cover that preventative stuff if you were to opt for the high deductible plans then you're typically saying look I'm just trying to insure like normal insurance I'm gonna try to insure the big event that might happen and I'm gonna try to lower my insurance premiums in that case and possibly pay more out of pocket for the preventative type of stuff so one increasingly popular type of health insurance is a high deductible health plan an HDHP these insurance plans are characterized by higher deductibles and lower premiums so you got a higher deductible if something happens you got to pay more for the deductible before the health insurance kicks in but of course you get lower premiums when you return for that and you would be covered against that big problem that could happen and be financially devastating for 2021 the IRS defines high deductible health plan as one that has deductibles of at least $1,400 for an individual $1,800 for a family total out of pocket maximums are $7,000 for an individual and $14,000 for a family for 2022 the deductible limits are the same but the out of pocket maximums will increase to $7,000 $7,050 and $14,100 respectively out of pocket maximums don't apply to out of pocket network services then you could have benefits for these high deductibles so high deductible health plans offer a unique advantage and that if you have one you're permitted to open and contribute pre-tax income for a health savings account which can be used to pay for qualified medical expenses so in other words you could think about this from the law term or why does this kind of come into play you're basically saying okay from a legal perspective you can see that the health insurance has been kind of skewed to be a traditional type of insurance that's going to be insuring you against a catastrophe that happens that's going to give you for the preventative coverage because they're trying to get people to do more of the preventative coverage it would be kind of like telling people for their car insurance they're going to have laws and litigation that's going to make the car insurance cover oil changes and tire rotations and whatnot like that so you got this kind of change and the insurance environment but clearly that's going to increase the amount of the cost and well look I just want to buy the insurance as it's normally there for I want to make sure I'm insured in case I get an illness that would be devastating financially to me and I'm going to pay out of pocket for the other kind of health care stuff that we have so you could say okay well then you might choose a high deductible type of plan in that case but the law still wants to and that means that most people that would do that would be lower income possibly type of people but the law still wants you to be covered on the preventative stuff so then you've got these benefits if you're in the high deductible plans to put money into the health savings account so let's take a look at it one time again you'd only have this if you had the high deductible account you might have some tax advantages for that to help you or incentivize the preventative care so high deductible health plans offer a unique advantage in that if you have one and contribute pre-tax income to a health savings account which can be used to pay for qualified medical expenses these plans offer a triple tax benefit in that contributions are tax deductible huge contributions grow on tax deferred basis and qualified withdrawals for health care expenses are tax free so if you take the money out it's tax free so it's a little bit complex to do to set this up because it gets kind of confusing but if you can do it right then you get the tax benefit and then you get the high deductible plan which would be lower on the premium side so in addition to health insurance ill people who qualify can get help from a number of auxiliary products available on the market these include disability insurance critical or catastrophic illness insurance and long-term LTC insurance special considerations in 2010 Barack Obama President Barack Obama and the Affordable Care Act the ACA into law in participating states the act expanded Medicaid a program a government program that provides medical care for individuals with very low incomes so in addition to these changes the ACA which is the Affordable Care Act established the federal health insurance marketplace it also prohibited insurance companies from denying coverage to patients with pre-existing conditions to remain on their patients insurance plan until they reach the age of 26 marketplace helps individuals and businesses shop for qualified insurance plans at affordable rates insurance available through the ACA which is the Affordable Care Act marketplace is mandated by the law to cover 10 essential health benefits through the healthcare.gov so there's a website to take a look at there's a website shoppers can find marketplace in their state so that could be beneficial especially for people that are in the low income area just note that it also can be complex because we got more laws and regulations there's could be tax kind of situations that are tied to it when they kind of calculate your premium which also can be quite confusing so you want to make sure you have that taken into consideration when you're getting advice or looking into that option so we got the Medicare and CHIP to public health insurance plans Medicare and the Children's Health Insurance Program the CHIP CHIP target older individuals and children respectively who need help with health insurance Medicare which is available to those age 65 or older also serves people with certain disabilities the CHIP plan has income limits and covers babies and children up to the age of 18 so what is health insurance and why do we need it health insurance is an agreement you make with an insurance with an insurer to have them pay some or all of your medical expenses in exchange for a premium so health insurance is going to be like other types of insurance although it can be more complex because we're not just insuring often times for a catastrophe that might be happening that would be a financial catastrophe but we also have the insurance that's covering possibly some of the preventative stuff and that makes it could be good could be beneficial but often also more complex to think about which insurance would be best for our particular situation having health insurance can keep you from incurring medical bills you can't afford to pay out of pocket who needs health insurance the simple answer is everyone health insurance can help to offset the cost of minor medical issues or major ones including surgeries or treatment for life treatment illnesses so but if you don't have health insurance you won't be penalized for it under the terms of the affordable care act so how do you get health insurance if your employer offers a health insurance as part of an employee benefits package you may be covered by it so that would be the first place to look because we still have these tax benefits that make it so that health insurance is often kind of linked to an employer which again I think worked better in the past where many people worked for one employer for a long time but we still have that kind of situation so the first place you might be looking is your employer to see if you can get a good health insurance and then go from there if you can also purchase health insurance through the health insurance marketplace so this might be mainly for possibly lower income individuals if you don't have access to health care elsewhere through the employer you got that health insurance marketplace option certain individuals may qualify for health insurance coverage through the Medicaid or Medicare programs as well how much does health insurance cost your costs for health insurance may vary based on the scope of coverage the type of plan you have and your deductibles so it's a bit more complex than other kinds of insurance because you get you might have these other components in different things that are taken into consideration as opposed to like liability insurance where it's basically the deductible and how much is going to be covered in the event that they covered event you know happens and there's going to be a payout so you got it to and obviously the premiums will change the price of the insurance the premiums that you're paying will vary in a way that you would kind of expect with regards to these other other factors including the deductibles the variety of the flexibility of the coverage and what is actually covered the copays and so on copays and coinsurance can also add to the cost so it's important to consider what you'll pay before enrolling in a health care plan