Lesson 13 Review
Basic Medical Insurance - Provides limited coverage to select types of medical care. Major Medical Insurance - Provides broader, more complete coverage.
Taxation of medical expense insurance pertains to people who accumulate medical expenses that add up to 7.5% of their gross income.
Medical Expense Categories:
- Hospital Expenses - Coverage for daily room and board, and miscellaneous expenses ("miscellaneous expenses" does not cover physician services, even in case of emergency)
- Surgical Expenses - Coverage for the cost of surgeon and anesthesiologist services.
- Physician's Expenses - Coverage for office visits, and nonsurgical care by a physician while hospitalized.
- Nurses' Expenses - Coverage for private duty nursing care.
- Convalescent Care Expenses - Coverage for skilled nursing facility expenses.
Basic Surgical Expense Methodology:
- Under the Surgical Schedule method, every surgical procedure is assigned a dollar amount by the insurer.
- Under the Reasonable and Customary approach, surgical expenses are compared to what is reasonable and customary for the geographical part of the country where the surgery was performed rather than stating a specific dollar amount.
- The Relative Value Scale assigns points to surgical procedures instead of dollar figures.
The Basic Physicians' Expense policy covers doctors' visits while the insured is hospitalized for a nonsurgical reason based on the indemnity approach. Typically, x-rays, drugs, and dental treatment are excluded.
Comprehensive major medical plans provide coverage for all major medical expenses under a single policy, and are not coordinated with basic plans. Supplementary major medical plans can be combined with basic plans to pick up expenses where the basic plan leaves off to cover expenses that otherwise would not be included at all. Both supplementary and comprehensive major medical plans contain deductibles and coinsurance.
A flat deductible is a stated amount that the insured must pay before policy benefits become payable.
With a corridor deductible, the basic medical expense policy will pay its limit, then the deductible, and finally, the supplementary policy will pick up the remainder.
With an integrated deductible, whatever amount the basic medical expense covers is applied to the deductible.
Preexisting condition clauses protect insurers from adverse selection.
HSAs accumulate tax-free funds to be used for medical expenses in high deductible and high out-of-pocket expense health plans. Nonqualified withdrawals are subject to income taxes and a 10% penalty tax. HSAs are fully portable and assets can accumulate over the years. Upon death, HSA ownership may be transferred to a spouse tax free.
In 2012, for an individual, a qualified high-deductible health plan is one with a minimum deductible of $1,200 and a $6,050 cap on out-of-pocket expenses (limits indexed annually). Family deductibles and out-of-pocket expense caps are twice the individual figures. Individuals with HSAs who are age 55 and older may make additional annual contributions (catch-up contributions) of $1,000.
The information contained in Unit 17 of the Florida study manual has been presented in Lesson 13 of the online course.
