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Do
I need health insurance?
While you may think that
you don't get sick very often, one illness or accident can generate thousands
of dollars in medical bills. Health insurance protects you from carrying the
financial strains of medical care by yourself and allows you to pick preferred
providers. Without insurance, you alone are responsible for your health care
bills, and if you die, these bills can be deducted from your overall estate.
While every hospital must accept emergency patients despite insurance, some
hospitals can refuse ongoing care or recovery care if you do not have health
insurance.
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What
are the main types of medical insurance?
There are four basic
types of insurance:
- Fee-for-Service Plans.
- Health Maintenance Organizations
(HMOs).
- Preferred Provider Organizations (PPOs).
- Point-of-Service Plans (POSs).
Fee-for-Service Plans
involve
paying a monthly premium for health insurance. Medical providers send you bills,
which you submit to the health insurance company. Fee-for-service coverage is
usually the most expensive and includes deductibles and out-of-pocket expenses. It
usually has an 80/20 split, in which the insurance company pays 80% and you pay
20%. With this plan you can choose any doctor.
Health Maintenance
Organizations (HMOs) have no
deductibles and no claim forms. HMOs are generally less expensive than
fee-for-service plans. If you are enrolled in an HMO, you are able to choose
from a network of physicians. However, if you want to see a doctor or specialist
other than your primary care physician (PCP), your PCP must refer you.
Preferred
Provider Organizations (PPOs) are networks of doctors and hospitals that
provide medical services to members at reduced rates.
Use of a PPO provider will usually maximize your benefits.
Care outside the PPO network is often covered at a lower benefit level.
For example services at a PPO provider may be paid at 90% while those at
a provider outside the PPO network may be paid at 70%.
PPO plans usually include deductibles.
Point-of-Service Plans
(POSs) are a combination of HMOs
and PPOs. They act like an HMO when you visit doctors within the network, but
when you go outside the network, they work like a PPO.
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What
is a pre-existing condition?
A pre-existing condition
is an injury or illness that began before your health insurance became
effective. Sometimes this includes
a medical condition of which you were aware but did not seek treatment for.
Coverage for pre-existing conditions varies for check your plan
carefully.
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What
is COBRA insurance?
COBRA (The Consolidated
Omnibus Budget Reconciliation Act of 1985) is a federal law that requires most
employers to offer covered employees and their dependents the opportunity for a
temporary extension of group health coverage in certain instances where coverage
under the plan would otherwise end. Depending
on the circumstances, coverage can be continued up to a total of 18 to 36
months.
This type of coverage
can be very expensive, but it lets you continue your health insurance until
coverage with your new employer begins.
Should you wish to elect COBRA, you must do so within 60 days of your
qualifying event or the date you are sent a COBRA notice by your employer or
insurance company.
What
does Medicare cover?
Medicare
is broken down into two parts: Part A and Part B.
Part
A
(Hospital Insurance Plan) helps pay for:
-
Hospital
stays: Semi-private room, meals, general nursing and other hospital services
and supplies (but not private-duty nursing, a television or telephone in
your room, or a private room unless medically necessary).
-
Home
health care: Intermittent skilled nursing care, physical therapy,
occupational therapy, speech language pathology services, home health aide
services, durable medical equipment (such as wheelchairs, hospital beds,
oxygen and walkers), supplies and other services.
-
Hospice
care: Pain and symptom relief and supportive services for the care of a
terminal illness. Home care is provided. Also covers necessary inpatient
care and a variety of services usually not covered by Medicare.
-
Skilled
nursing facility care: Semi-private room, meals, skilled nursing,
rehabilitation services and other services and supplies.
-
Blood:
From a hospital or skilled nursing facility during a covered stay.
Part
B
(Medical Insurance Plan) helps pay for:
-
Medical
expenses: Doctors’ services, inpatient and outpatient medical and surgical
services and supplies, physical, occupational and speech therapy, diagnostic
tests and durable medical equipment.
-
Clinical
laboratory service: Blood test, urinalysis and more.
-
Home
health care: (under certain conditions) Intermittent skilled care, home
health aide services, durable medical equipment and supplies and other
services.
- Outpatient
hospital services: Services to find or treat an illness or injury.
- Blood: As
an outpatient, or as a part of a Part B covered service.
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How
can I lower my health insurance costs?
While
it seems the cost of health care is always rising, there are steps you can take
to lower your costs:
- Purchase generic drugs when available.
- Examine hospital bills carefully.
- Use doctors within your PPO, POS, or
HMO network
- Use emergency room care only for
bonafide emergencies.
- Stay healthy (eat right, don’t smoke,
etc.).
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What
is long-term care (LTC) insurance?
Planning for long-term
care is not just a good idea – it’s essential for everyone so that families
may retain financial independence and choice when care is needed. Long-term care
insurance can either pay for some or all long-term care needs.
Things to consider:
- The average annual cost of
nursing-facility care or full-time home care today is $50,000, according to
HIAA Consumer’s Guide to Long-Term Care, 1998.
- The average nursing-home stay is
two-and-a-half-years, according to Consumer Reports, 1997.
Long-term care is
different from traditional medical care. Long-term care helps one live as he or
she is now; it may not help improve or correct medical problems. Long-term care
services may include help with:
- Activities of daily living.
- Home health care.
- Respite care.
- Adult day care.
- Care in a nursing home.
- Care in an assisted living facility.
- Care management services.
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Do
I need LTC insurance?
Your age, health status,
overall retirement goals, income and assets will determine if you should buy a
long-term care insurance policy.
You should CONSIDER buying
LTC insurance if:
- You have significant assets and income
you want to protect.
- You want to pay for your own care.
- You want to stay independent of the
support of others.
You should NOT buy LTC
insurance if:
- You can’t afford the premiums.
- You have limited assets.
- Your only source of income is Social
Security benefits or Supplemental Security Income (SSI).
- You often have trouble paying for
utilities, food, medicine or other important needs.
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What
types of care are covered with LTC insurance?
Every long-term care
insurance policy covers different types and levels of care. Below are some types
of care covered by policies that you should consider while choosing a plan:
Skilled nursing home
care is ordered by a physician,
usually needed 24 hours a day and follows a plan or schedule. Medical personnel
such as registered nurses or professional therapists usually administer care.
Intermediate care
is care on a skilled level, but in limited or occasional amounts.
Custodial care
(personal care) helps individuals
meet personal needs such as bathing, dressing and eating. Someone without
professional training may provide care.
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How
do Medicare and Medicaid fit into LTC insurance?
Medicare
- Medicare’s skilled nursing facility (SNF)
benefit does not cover most nursing home care. The SNF benefit covers you
only if a medical professional says you need daily skilled care after you
have been in the hospital for at least three days. You should not rely on
Medicare for your long-term care needs.
- Medicare does not cover home care
services. Medicare does not pay for home health aides who give personal care
unless you are homebound and are also getting skilled nursing or therapy.
Medicaid
- Medicaid pays for nearly half of all
nursing home care. Medicaid also pays for some home and community-based
services. In order to qualify, you must have depleted assets.
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Do
I need disability insurance?
Disability insurance fills
the financial gap after an illness or accident keeps you from working. You may
need disability insurance if you have no additional source of revenue to pay
your bills once you are unable to work. Single people may want to consider the
importance of disability insurance as an additional source of support, if they
have no other financial resources to rely on.
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What
about Social Security disability benefits?
Social Security disability
payments are not intended for temporary disabilities or partial disabilities.
The government requirements for this coverage are very strict.
In order to receive
benefits, you must:
- Have paid through payroll deductions
into the Social Security fund.
- Have worked a certain number of
quarters within a year, while contributing to the Social Security fund.
- Be unable to do any
"substantial" work – defined as earning $500 or more a month –
for at least a year.
- Have a disability that is expected to
last at least one year or result in death.
- Wait five months before becoming
eligible for disability payments.
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What’s
the difference between short-term disability (STD) and long-term disability
(LTD)?
Short-Term Disability
(STD) provides a paycheck to
replace lost income as a result of a disability. STD policies are designed to
provide supplemental payments for a few weeks or months. Different policies have
different waiting periods before an individual can start collecting money after
a disability occurs.
Long-Term Disability
(LTD) provides insurance coverage
for disabilities that last many years or a lifetime. The waiting time for LTD
policies is lengthier than for STD policies, but LTD insurance generally offers
greater compensation over a longer period of time. This type of coverage is
designed to protect against huge losses from which you can not easily recover.
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What
types of disabilities are generally excluded from coverage?
- Self-inflicted injuries.
- Pre-existing conditions.
- Disabilities that occurred during
active military duty.
Companies define
disability in different ways. Understanding a company’s definition is crucial
to finding a policy that meets your needs.
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What
factors affect disability insurance costs?
- Elimination Period.
The
longer the waiting period before collecting money from the policy, the lower
your premium. Common elimination periods are 30, 60 or 90 days.
- Occupation.
Jobs
that have higher risks associated with them draw a larger premium.
- Age.
The
younger you are when you purchase the policy, the lower the premiums will be
throughout the term of a policy.
- Health.
Pre-existing conditions can increase premium or cause an insurance company
to deny a claim or coverage.
- Smoking.
Quitting
smoking will decrease the amount of premium you will pay.
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Do
I need life insurance?
If
you’re married or single with children, you have the greatest need for
life insurance. Life insurance can make up for:
- Lost income.
- Future expenses, such as college
education.
- Mortgage payments.
- Auto loans.
- Living expenses.
- Additional care-giving for children.
If
you are single with no children, life insurance will help pay for funeral
expenses and outstanding debts. Single
people should consider life insurance based on the comparison of debt against
their assets. If their assets outweigh their debt, life insurance may not be
needed.
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What’s
the difference between term insurance and cash value insurance?
Term insurance
insures your life for a specific term and then pays a specific death benefit. It
does not build cash value. For example, let’s say you purchase a $200,000 term
policy for 15 years. If you die within that 15-year period, your beneficiaries
will receive $200,000. If you do not die within that 15-year period, you would
need to take out another policy if you want to provide for your beneficiaries.
Cash value insurance
provides living benefits, as well as death benefits. This type of insurance puts
part of your premium into an investment-type account. The money put into this
account can be accessed throughout the life of the policy; however, withdrawals
will reduce the death benefit. Types of cash value policies include:
- Whole Life Insurance.
- Universal Life Insurance.
- Variable Life Insurance.
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What’s
the difference between Whole Life, Universal Life and Variable Life policies?
Whole Life Insurance
covers
you for your whole life. The premium is guaranteed never to change, and
the younger you are when you purchase the policy, the lower the premiums.
Universal Life
Insurance is like a combination of
term insurance and cash value insurance. Part of your premium is applied to a
term policy, and the remainder is applied to an investment-type account. This
account earns a variable interest rate (with a guaranteed limit) from a fund,
which the insurance company uses to make investments.
Variable Life Insurance
acts similarly to an investment
fund. It is a combination of term insurance and cash value insurance. Part of
your premium is applied to a term policy, and the remainder is applied to an
investment-type account. However, you have control over how it is invested
instead of the insurance company.
What
are annuities?
Annuities are mainly an
investment-type account. They are insured through the state and are
tax-deferred. They can be purchased with a lump sum of money, or payments can be
spread over time. There are two basic types of annuities:
A fixed annuity
guarantees a fixed interest rate on your money. The insurance company
invests the money in an account, and despite the success or failure of it,
you will receive a fixed amount.
A variable annuity
lets you tell the insurance company how you want your money invested. This type
of annuity is not guaranteed.
With both types of
annuities there is a fixed amount of time you must wait before collecting
payments, unless it is an immediate annuity.
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Should
I insure my children?
While in some cases this
type of insurance may be needed, never use this to supplement the death benefit
or policy of a primary breadwinner. The primary income-generating parent should
be fully protected before purchasing insurance for children or a
non-wage-earning spouse. It is recommended that a non-wage-earning spouse be
insured for household services before considering insurance for children.
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