Disability, Medical Expenses & Senior Plans 

 January 31, 2022

By  QAEL YAREK

Disability, Medical Expenses & Senior Plans

  1. Basic Principles of Life, Health Insurance and Annuities
  2. Nature of Insurance; Risk, Perils and Hazards
  3. Legal Concepts of the Insurance Contract
  4. Life Insurance Policies, Provisions, Options and Riders
  5. Life Insurance Premiums, Proceeds and Beneficiaries
  6. Life Insurance Underwriting and Policy Issue
  7. Group Life Insurance
  8. Annuities
  9. Social Security
  10. Retirement Plans
  11. Uses of Life Insurance
  12. Health and Accident Insurance
  13. Health Insurance Providers
  14. Disability Income Insurance
  15. Medical Expense Insurance
  16. Private Insurance Plans for Seniors
  17. Health Insurance Policy Provisions
  18. Health Insurance Underwriting
  19. Michigan Laws and Rules Pertinent to Insurance

Disability Income Insurance

Purpose of Disability Income

The Insurance Agreement of a disability income is designed to provide an individual with a specified income benefit in the event of a disabling accident or sickness or accident and sickness combined.

The financial impact of total disability may be worse than the financial impact of death. Disability Income Policies are available as individual plans and group plans. They also serve a very important function for business and business owners.

The most common type of individual disability income policy is the guaranteed renewable policy, which typically adjusts the premium on an annual basis and provides benefits for nonoccupational illnesses and injuries.

Disability Income Benefits

The insured's income limits the amount of the monthly benefit that an insured may select in a Disability Income Policy. The benefits paid under a disability income policy are in the form of monthly income payments. The Highest Premium under the disability income policy is a 14-day waiting period with a 10-year benefit period.

Insurers typically place a ceiling on the amount of disability income protection they will issue on any one applicant, defined in terms of the insured's earnings.  Insurers use two methods to determine the amount of benefits payable under their disability income policies: Percent-of-Earnings Approach & Flat Amount Method.

  • Percent-of-Earnings Approach: Determines the benefit using a percentage of the insured's pre-disability earnings and considers other sources of disability Income.
  • Flat Amount Method: Under this approach, the policy specifies a flat income benefit amount that will be paid if the insured becomes totally disabled. Normally, this amount is payable regardless of any other income benefit the insured may receive.

In the event the insured dies because of the disability, any earned but unpaid benefits will be paid to the insured's state.

Group long-term disability benefit amounts are typically limited to 60% of a participant's income.

Disability Defined

With one exception (partial disability), an insured must be totally disabled before benefits under a disability income policy are payable. What constitutes total disability varies from policy to policy. The insured must meet the definition set forth in her policy.

  • In disability Income Insurance, the definition of total disability often considers the insured's education, training, and experience.

There are two definitions:

  1. Any Occupation
  2. Own Occupation

ANY OCCUPATION

Any Combination or also known as "Combination Definitions", requires the insured to be unable to perform any occupation for which he is reasonably suited by reason of education, training, or experience to qualify for disability income benefits.

OWN OCCUPATION

The "owner occupation" definition of total disability requires that the insured be unable to preform the insured's current occupation because of an accident or sickness.

  • From a policyowner's point of view, an "own occupation" disability income policy is more advantageous, it is more expensive and difficult to qualify for as well. 

PRESUMPTIVE DISABILITY

This provision specifies certain conditions that automatically qualify the insured to the full benefit because the severity of the conditions presumes the insured is totally disabled even if he can work. Presumptive disabilities include blindness, deafness, loss of speech and loss of two or more limbs (in this case it is presumed you are disabled).

  • A Presumptive Disability Provision typically waives the usual requirements for total disability benefits.

PARTIAL DISABILITY

The inability to he insured to perform one or more important duties of the job or the inability to work at that job on a full-time basis. Either of which results in a decrease in income. Normally, partial disability benefits are payable only if the policyowner has first been totally disabled. Permanent Partial Disability would be less than total impairment and equal to permanent impairment, this benefit is intended to encourage disabled insureds to get back to work, even on a partial-time basis, without fear that they will lose all their disability income benefits. The amount of benefit payable when a policy covers partial disabilities depends on whether the policy stipulates a flat amount to a residual amount.

FLAT AMOUNT BENEFIT

A flat amount benefit is a set amount stated in the policy. This amount is usually 50% of the full disability benefit. 

For example, lets assume Helen, who has a disability income policy with an own occupation definition, is very injured after falling down a flight stairs. She is unable to work for four months during which time her disability income policy pays a full benefit. After four months she can return to work, but only on a part-time basis earning substantially less than she did before her injury. If her policy did not contain a partial disability provision, her benefits would cease entirely because she no longer meets the definition of totally disabled. However, if her policy provides for partial disability benefits to be paid as a flat amount, she will be able to work on a part-time basis and continue to receive half of her disability benefits.

RESIDUAL AMOUNT BENEFIT

Normally used after a full disability payment have been paid and the insured is back to work, however with a reduces workload. A residual amount benefit is based on the proportion of income lost due to the partial disability, considering the fact that the insured is able to work and earns some income. The benefit is usually determined by multiplying the percentage of lost income by the stated monthly benefit for total disability.

For example, let's say your job was to was 10 cars a day. You broke your arm, were still able to work, but could only wash 6 cars a day because of the residual impact of the broken arm. If the insured suffered a 40% loss of income because of the partial disability, the residual benefit payable would be 40% of the benefit that the policy would provide for total disability.

Residual disability Benefit is usually a percentage of the total disability benefit for when the insured is working, but unable to perform some of the duties of his/her occupation.

REHABILITATION BENEFIT

An insured may not be able to return normal occupation because of a disability, but still be able to work at some kind of job. The rehabilitation benefit facilitates vocational training to prepare insureds for a new occupation. Under the rehabilitation benefit in a disability income policy, the insurer will pay approved cost of a rehabilitation program to help a disabled return to work.

CAUSE OF DISABILITY

Policies that use the accidental means provision require that the cause of the injury must have been unexpected and accidental. Policies that use the accidental bodily injury provision (or results provision) require that the result of the injury has to be unexpected and accidental.

Today, most disability income policies use the accidental bodily injury or results provision, which is far less restrictive than the accidental means provision.

Disability Income Policy Provisions [Probationary Period]

The probationary period specified in a disability insurance policy if the period of time that must elapse following the effective date of policy before benefits payable. It is one-time-only that begins on the policy's effective date and ends 15 or 30 days after the policy has been in force.

The purpose of the probationary period is to exclude preexisting sicknesses from coverage and provide a guidepost in borderline cases when there is a question as to whether an insured became ill before or after the effective date of the policy. This helps protect the insurer against adverse selection because those who know they are ill are more likely to try to obtain insurance coverage.

  • Probationary period does not apply to accidents because you cannot anticipate an accident.

ELIMINATION PERIOD

The elimination period is the time immediately following the start of a disability when benefits are not payable. Elimination periods eliminate claims for short-term disabilities, the longer the elimination period, the lower the premium for comparable disability benefits. Also called "Waiting Period".

BENEFIT PERIOD

The benefit period is the maximum length of time that disability income benefits will be paid to disabled insured, the longer the benefit period, the higher the cost of the policy.

  •  Individual Short-Term Policies: provide benefits for 6 months to 2 years.
  • Individual Long-Term Policies: are characterized by benefit periods of more than two years, such as 5,10, or 20.

DELAYED DISABILITY PROVISION

In some cases, total disability does not occur immediately after an accident but develops some days or weeks later. Most policies allow a certain amount of time during which total disability may result from an accident and the insured will still be eligible for benefits. The amount of time allowed for a delayed disability may be 30, 60 or 90 days etc.

RECURRENT DISABILITY PROVISION

It is not unusual for a person who experienced a total disability to recover and the weeks or months later, undergo a recurrence of the same disability. Most policies provide for recurrent disabilities by specifying a period of time during which the recurrence of a disability is considered a continuation of the prior disability. The insurer will then pay benefits without a new elimination period; if the recurrence take place after that period, it is considered a new disability and will be subject to a new elimination period before benefits are again payable.

  • For example, say you were recovering from a serious illness and missed 2 months of work. Then you went back and 2 weeks later the disability came back or recured and you were forced to miss more work while you recovered again.

CHANGE OF OCCUPATION PROVISION

Under the change of occupation provision, if an individual covered under a disability income policy is injured while engaged in an occupation that is more hazardous than the occupation stated in the policy, the result will be the benefit level is reduced. If the insured is engaged in a less hazardous occupation than that was originally stated in the policy, the benefits will likely be increased.

nondisabling injury

Frequently, a person covered by a disability income policy will suffer an injury that does not qualify for income benefits. Many such policies include a provision for a medical expense benefit that pays the actual cost of medical treatment for nondisabling injuries that result from an accident or sickness.

ELECTIVE INDEMNITY

Some short-term disability Income Policies provide for an optional Limp-sum payment for certain named injuries.

COVERAGE AFTER AGE 65

Disability Income Policies typically require the insured to be actively working for the stated number of hours per week if coverage extends past age 65.

Disability Income Policy Riders

WAIVER OF PREMIUM RIDER

A waiver of premium rider generally is included with guaranteed renewable and noncancelable individual disability income policies. It exempts the policyowner from paying the policy's premiums during periods of total disability. 

To qualify for the exemption, the insured must experience total disability for more than a specified period, commonly three or six months. The waver of premium generally does not extend past the insured's age 60 or 65. 

  • Premiums are waived beginning at the date of disability.

DISABILITY BENEFITS IN A LIFE INSURANCE CONTRACT

Many Insurers offer a waiver of premium rider that also includes a disability Income benefit. Most riders provide a benefit of one-percent of the face amount of the policy which is payable if the insured is totally disabled.

SOCIAL SECURITY RIDER

The Social Security Rider provides for the payment of additional income when the Insured is eligible for Social Insurance Benefits, but those benefits have not yet begun, have been denied, or have begun in an amount less than the benefit amount of the rider.

COST-OF-LIVING ADJUSTMENT (COLA) RIDER

The cost-of-living (COLA) rider provides for indexing the monthly or weekly benefit payable under a disability policy to changes in the Consumer Price Index (CPI).

Typically, the benefit amount is adjusted on each disability anniversary date to reflect changes in the CPI.

GUARANTEED INSURABILITY RIDER

This option guarantees the insured the right to purchase additional amounts of disability Income coverage at predetermined times in the future without evidence of insurability.

EXCLUSION RIDER

An exclusion rider on a disability income policy means that a specified disease or body part is not afforded coverage.

Important Notes

  • A Guaranteed Insurability Rider guarantees the insured the option of purchasing additional amounts of disability income coverage at predetermined times without requiring the insured to provide evidence of insurability.
  • The best way to describe a Disability Elimination Period is a "Time Deductible".
  • If a policyowner suffers an injury that renders him incapable of performing one or more important duties. Any decrease in income resulting from his injury would make him eligible for benefits under a Partial Disability.
  • A Disability Income Benefit is intended to provide cash payments for living expenses.
  • With regard to Disability Insurance, the waiting (elimination) period is to exclude payments for a short-term illness or injury.
  • From an insurance perspective, Loss Of Income is the Primary risk associated with disability. When an insurer underwrites an individual for disability income coverage, the most commonly used factor is Annual Earnings.
  • Premiums are waived beginning at the date of disability.
  • All future premiums are NOT waived if the insured recovers from the disability.
  • The "Own Occupation" clause states that insureds are totally disabled when they cannot perform the major duties of their regular occupation.
  • Long-Term Disability Benefits are coordinated with Social Security. Which are paid typically in Periodic Income. Group long-term disability benefit amounts are usually limited to 60% of the participant's income.

Medical Expense insurance

Medical expense insurance provides financial protection against the cost of medical care for accidents and illness. Loss due to accident and illness are the perils covered by medical expense insurance. Coverage may be provided for hospital care, physician services, surgical expenses, diagnostic and laboratory services, dugs, nursing, and other medically necessary procedures. The broadness of the specific types of services and treatment are dependent upon the medical expense policy written. Medical expense insurance typically excludes coverage for care provided in a government facility. Individual medical expense insurance typically is written for a term of 1 year.

Basic Medical Expense Plans

Basic medical expense insurance is sometimes called "first dollar insurance". Unlike major medical expense insurance, it provides benefits up front without having to satisfy a deductible. Basic medical expense policies classify their coverages according to general categories of medical care:

  • Hospital Expense
  • Surgical Expense
  • Physicians (nonsurgical) expense

Basic Medical expense insurance typically has lower benefit limits than major medical insurance, the benefits provided by basic medical expense insurance are lower than the actual expenses incurred. A particular fee charged by a physician or other health professionals is called a usual, customary, and reasonable expense. The amount of the patient's claim payment will be based on the terms of the policy.

HOSPITAL EXPENSE POLICIES

Cover hospital room and board, miscellaneous hospital expenses (such as lab and x-ray charges), medicines, use of operating rooms, and supplies. These expenses are covered while the insured is confined in a hospital.

There is no deductible and the limits on room and board are set at a specified dollar amount per day up to a maximum number of days. Hospital room and board benefits cover expenses for occupancy of the room and bed, general nursing care, food an beverages, and personal hygiene items.

Concurrent review is a method of utilization review that takes place on-site when a patient is confined to a hospital. A typical result of a concurrent review is that the length of stay in the hospital is monitored.

Preadmission testing helps control health care costs primary by reducing the length of hospitalization.  These limits may not provide for the full amount of hospital room and board charges incurred by the insured. 

For Example, if the hospital expense benefit was $200 per day and the hospital actually charged $400 per fay, the insured would be responsible for the additional $200 per day.

BASIC SURGICAL EXPENSE COVERAGE

Commonly written in conjunction with hospital expense policies, these policies pay for the costs of surgeon's services, whether the surgery is performed in or out of the hospital. Coverage includes surgeon's fees, anesthesiologist, and the operating room. 

Under the Surgical Schedule Approach, every surgical procedure is assigned a dollar amount by the insurer

Under the Reasonable & Customary Approach, the surgical expense is compared to what is deemed reasonable and customary for the geographical part of the country where the surgery was performed. If the charge is within the reasonable and customary parameters, the expense is normally paid in full. If the charge is more than what is reasonable and customary, the patient must absorb the difference.

Usual, Customary, & Reasonable (UCR) charges the maximum amount the insurer will consider eligible for reimbursement under a health insurance plan. It is based primarily on average charges within a geographic area.

The Relative Value Approach is similar to the surgical schedule method. The difference is that instead of a flat dollar amount being assigned to every surgical procedure, a specified set of units is assigned. The policy will carry a stated dollar-per-unit amount (known as the conversion factor) to determine the benefit.

BASIC PHYSICIAN'S EXPENSE COVERAGE

Often referred to as Basic Physicians Nonsurgical Expense Coverage because it provides coverage for nonsurgical services a physician provides. Basic medical expense coverage can be purchased to cover emergency accident benefits, maternity benefits, mental and nervous disorders, hospice care, home health care, outpatient care and nurse's expenses. Regardless of what type of plan or coverage is purchased, these policies usually offer only limited benefits that are subject to time limitations.

OTHER BASIC PLANS

  • Physician Assistants: No agency, institution or physician providing a service for which payment or reimbursement is required to be made under a policy governed by State law shall be denied such payment or reimbursement on account of the fact that such services were rendered through a physician assistant.
  • Nurse's Expense Benefits: Usually pay only for private duty nursing care arranged according to a doctor's order while the insured is a hospital patient. Both registered professional and licensed practical nurses may be covered.
  • Convalescent Care Facility Benefits: Provide a daily benefit for confinement in a skilled nursing facility for a limited recovery period following discharge from a hospital.
  • Pharmacy Benefits: Patient care services are generally limited to medication dispensing and medication therapy management activities required by individual state boards of pharmacy. A controlled substance list is a pharmacy benefit that covers prescription drugs.

Major Medical Expense Plans

Major medical expense insurance usually picks up where basic medical expense insurance leaves off in one of two ways: as a supplement to a basic plan or as a Comprehensive stand-alone plan. Major medical expense plans offer broad coverage under one policy:

  • Benefit Periods are generally for one year. 
  • Benefits for reasonable and necessary medical expenses are subject to policy limits.
  • Comprehensive coverage for hospital expenses (room and board and miscellaneous expenses, nursing services, physician's services, etc.)
  • Catastrophic medical expense protection
  • Benefits for prolonged injury illness

Unlike the basic medical expense plans, these policies usually carry deductibles, coinsurance requirements, and have large benefit maximums. Coverage is provided for both inpatient and outpatient hospital expenses. 

Hospice benefits under a Major Medica Plan normally includes coverage for pain management, home-based services & counseling. The list of prescription drugs covered by a pharmacy benefit is called a drug formulary.

Supplementary major medical

These policies are used to supplement the coverage payable under a basic medical expense policy. After the basic policy pays, the supplemental major medical will provide coverage for expenses that were not covered by the basic policy, and expenses that exceed the maximum. If the time limitation is used up in the basic policy, the supplemental coverage will provide coverage thereafter.

Comprehensive major medical

Combines the future of basic expense coverage and major medical coverage, sold as one policy. Cover practically all medical expenses, hospital, physicians, surgical, nursing, drugs, laboratory tests, etc..

Comprehensive major medical policies include a deductible (usually a single deductible per person and per family, but corridor deductible may also apply), coinsurance, and are generally sold on a group basis. An example of a comprehensive health policy is a major medical policy.

Most major medical plans contain a "lifetime maximum benefit" that limits the insurer's total exposure under a contract, while few contain a "per cause maximum benefit" which limits the medical expenses covered for each cause. More expensive plans are characterized by an unlimited lifetime limit.

restoration of used benefits

Major medical policies that have a lifetime maximum benefit or a per year maximum will always have the possibility that the limit could be exhausted. This provision allows the maximum benefit to be restored after a specific amount of the benefit is used or after the plan has been in effect for a specified period of time.

  • The amount of coverage restored is usually a percentage of the used benefit.

Major Medical Expense Plans Characteristics

DEDUCTIBLES

A deductible is a stated initial dollar amount that individual insured is required to pay before insurance benefits are paid. Deductibles are used primarily to help control the cost of premiums and are used most frequently with major medical policies. A policy can have multiple types of deductibles

  • Flat (initial): Deductible is a stated dollar amount that applies to a cover loss (for example $500). This deductible is applied per occurrence, per insured individual.
  • Corridor Deductible: Covers the gap between basic coverage and major medical. When a major medical policy is supplemented basic coverage (that contains no deductible), the deductible is not applied until the basic coverage has been exhausted.
  • Integrated Deductible: Is used when a major medical plan is supplementing basic coverages. For example, if the major medical has a $500 deductible and the insured has basic coverage of $500 or more, then, in the event of a claim, the amount paid by the basic coverage satisfies the major medical deductible. However, if the basic does not cover the entire deductible amount of the major medical plan, the insured is required to make up the difference.
  • In a Per -Cause Deductible: The insured must satisfy a deductible for each accident or illness.
  • In an All-Cause-Deductible: The insured only has to meet the deductible amount once during the benefit period.
  • With a Calendar-year Deductible: The dedcutible year begins on January 1st and ends, on December 31st. Calendar-year deductible reset every January 1st. A Calendar-year deductible requires the insured to pay a specific sum out of pocket before any benefits are paid in a calendar year.

The carryover provision permits expanses incurred during the las 3 months of the calendar year to be carried over into the new year if needed to satisfy the deductible for the next year.

COMMON ACCIDENT OR SICKNESS DEDUCTIBLE

Some major medical plans include a common accident or sickness provision which states that only one deductible (usually equal to the individual deductible amount) need be satisfied when two or more insureds from the same family are injured in the same accident or suffer concurrently from the same illness.

FAMILY MEMBER DEDUCTIBLE

A Family Maximum Deductible waives the deductible for all family members after some of them have satisfied individual deductibles within the same year. Once the family deductible is satisfied, future covered medical expenses of all family members are paid just as if each member of the family had satisfied his or her individual deductible.

COINSURANCE

Coinsurance is another characteristic of major medical policies. It is a sharing of expenses by the insured and the insurer. After the insured satisfies the deductible, the insurance company and the insured share in the remainder of expenses.

  • The insurance company pays a high percentage of the additional expenses (usually 75% or 80%) and the insured pays the reminder. Typically, the percentage of payment participation required of the insured a 20% and the insurance company pays 80%.

Coinsurance requires the insured to participate in the payment of expenses.

STOP-LOSS(Out of Pocket Maximum/Minimum)

Stop-Loss is a future designed to limit the amount of expense the insured may be exposed to in a policy year. Often, the stop-loss will state that after the insured has paid a specific amount towards his covered expense, the insurer will pay 100% of the remaining expenses for the remainder of the policy year, up to the maximum limit of the policy.

PRE-EXISTING CONDITIONS

Most policies contain a benefit limitation on pre-existing conditions. Limitations apply to all pre-existing conditions whether or not the insured declared them on the application. Unlike the impairment rider, the exclusion for pre-existing conditions is subject to the time limit of certain defenses.

When considering the replacement of an individual accident and health insurance policy, a preexisting condition exclusion in the new contract may reduce the insured's benefits. The new policy may not cover the same health condition under the new policy.

INTERNAL LIMITS

Certain types of expenses may have limits placed on the dollar amount of certain services or on the type of service provided. For Example, the policy will only pay for a semi-private room, not for a private room; or it will pay only medical expenses that are usual and customary; or it will pay lifetime alcohol or drug rehab expenses only up to $10,000 or for 75 days, etc..

Medical Expense Accounts

HEALTH SAVINGS ACCOUNT (HSA)

A tax-advantage medical savings account available to individuals who are enrolled in a high-deductible health plan. The funds contribute to an account are not subject to federal income tax at the time of deposit and roll over and accumulate year to year if not spent.

HSAs are owned by the individual and are an alternate tax-deductible source of funds used to pay for qualified medical expenses at any time without federal tax liability or penalty. Health Savings Accounts (HSA) are designed to help individuals save for qualified health expenses such as deductibles, coinsurance, prescription drugs, etc.. that they, their suopse, or their dependents incur. 

HSAs are Tax Deductible

An individual who is covered by High-Deductible Health Plan can make tax-deductible contributions to an HSA and use it to pay for out-of-pocket medical expenses.

  • Contributions to HSAs by individuals are deductible, even if the taxpayer does not itemize. 
  • Contributions by an employer are not included in the individual's taxable income.

To be eligible for a Health Savings Account, an individual must be covered by a High-Deductible Health Plan (HDHP), must not be covered by other health insurance (does not apply to accident insurance, disability, dental care, vision care, long-term care), must not be eligible for Medicare, and can't be claimed as dependent on someone else's tax return. Distributions other than for qualified medical expenses to a Health Savings Account are taxable and subject to a penalty of 20%.

HEALTH REIMBURSMENT ARRANGEMENTS (HRA)

Health Reimbursement Arrangements must be established by the employer. Employer-funded, tax-advantaged health benefit plans that reimburse employees for out-of-pocket medical expenses and individual health insurance premiums may be tax-free if the employee paid for qualified medical expenses or a qualified medical plan. Employee does NOT contribute to an HRA.

  • Unused amounts may be carried forward for reimbursement in future years.

MEDICAL SAVINGS ACCOUNT (MSA)

Created to help employees of small employers, as well as self-employed individuals, pay for their medical care expenses. MSA's are tax-free accounts set up with financial institution such as banks and insurance companies. 

  • Qualified medical savings accounts are available for employers with no more than 50 employees.

FLEXIBLE SAVINGS ACCOUNT (Flexible Spending Accounts)

An FSA allows an employee to set aside a portion of earnings to pay for qualified medical expenses (such as prescription medication) as established in the cafeteria plan.

  • Tax-advantaged accounts that can be set up through a cafeteria plan of an employer.

Important Notes

  • In a Hospital Indemnity Plan, an elimination period refers to the number of days an insured must wait before becoming eligible to receive benefits for each hospital stay.
  • An insured has a stop-loss limit of $5,000, a deductible of $500, and an 80/20 coinsurance. The insured incurs $25,000 of covered losses. The insured will have to pay only $5,000 at a STOP.
  • Benefit Schedules set pre-determined limits or maximums on how much money an insured can be reimbursed for a covered loss.
  • An injury occurring at the insured's residence would be covered under Medical Expense Insurance.
  • A Fee-Per-Service payment system is one where the provider is paid for each service given.
  • Work-related injuries are typically covered by Worker's Compensation Insurance.
  • Group Insurance Carriers will pay 90% of the covered loss after the deductible has been applied.
  • With an Indemnity Plan, an insured is provided a specific dollar amount for services.
  • The person who is paid on a "Fee-For-Services" basis is also known as Provider. When a provider does not have an agreement with the insurer for payment, they will be reimbursed a usual, customary, and reasonable fee.
  • A Deductible is a Stated Initial dollar amount that the individual insured is required to pay before insurance benefits are paid.
  • Medical Expenses that arise from a Negative Reaction to Prescribed Medication would be covered by a major medical insurance policy.
  • Distributions from a Health Savings Account (HSA) for qualified medical expenses are tax-free.
  • The term "Maximum Benefits" refers to the upper limit of the total lifetime benefits the insurer will pay.
  • Health Insurance policies that can be purchased to cover specific low frequency diseases are called limited policies.
  • There is normally a number of "critical illnesses" that a Critical Illness Plan will cover. This coverage is NOT limited to a single disease.
  • A health insurance plan with First Dollar Coverage means no deductible payment is required before expenses are reimbursed.
  • Dread Disease Insurance provide benefits for ONLY specific types of illnesses such as cancer or stroke.

private insurance plans for seniors

Medicare: Supplements, Select, C & D

MEDICARE SUPPLEMENT POLICIES (Medigap)

Medicare Supplement Policies (Medigap) insurance is specifically designed for individuals by the age of 65 who have enrolled in Medicare however, anyone currently receiving Medicare Parts A & B is eligible to participate in the Medigap Policy.

Medicare-in-hospital deductible is addressed with Medicare Supplemental Insurance, Medigap policies do not pay costs for Medicare Parts C & D. As of June 2010, there are 10 standard Medigap Plans. Each of the 10 plans has a letter designation of A, B, C, D, F, G, K, L, M, or N.  These policies were standardized by the National Association of Insurance Commissioners (NAIC) to help consumers understand and compare them and make informed buying decisions. These standards can be found in NAIC's Medicare Supplement Insurance Minimum Standards Model Act.

Medicare Supplement Policies sometimes provide preventive medical care benefits such as Annual Physical Exams. A Medicare Supplement Policy must NOT contain benefits which duplicate Medicare benefits. Individuals over 65 who have just enrolled in Medicare Part B for the first time cannot be refused a Medicare Supplement Policy and cannot be rated if they apply for coverage within 6 months of Part B enrollment (in other words, Medicare Supplements must be guaranteed issue during open enrollment).

All Medicare Supplement Policies must be guaranteed renewable and can only be canceled by the insurer for nonpayment of premiums. Hospice Care is included in most standard Medicare Supplement Insurance Policies. Hospice care typically offers a family counseling benefit.

Medicare Supplement policies typically provide foreign travel emergency health care coverage as a core benefit when you travel outside the U.S. Coverage for Medicare Part B excess charges is a Medicare Supplement additional benefit. Medicare Supplement Plan F and G are the only Medicare Supplement Insurance plans that cover costs known as Medicare Part B excess charges. An excess charge is the difference between what a doctor or provide charges and the amount Medicare will pay. In general, the following six minimum standards apply to all policies-designated as Medicare Supplement Insurance. The policy must supplement both Pat A & B [Medicare]. The policy must automatically adjust its benefits to reflect statutory changes in Medicare.

The policy must cover all expenses not covered by Part A from the 61st to the 90th day. Furthermore, it must cover the lifetime reserve copayment and must provide full coverage for an additional 365 days after Medicare benefits are exhausted.

If the policy excludes coverage for preexisting conditions, the exclusion cannot exist for longer than six months. No coverage can be denied as a preexisting condition after the policy has been in effect for six months. The policy must include a minimum 30 day free-look provision.

Part B expenses not covered by Medicare (that is, the 20% co-payment) must be covered by the Medigap policy. However, policies may include a deductible before this benefit becomes payable.

CORE BENEFITS

All Medicare Supplement plans cover coinsurance on hospital costs, up to an additional 365 fays after Medicare Part A hospital benefits run out. All Medigap policies also cover at least part of these costs: 

  • Medicare Part A hospice coinsurance or copayment
  • Medicare Part B coinsurance or copayment
  • First 3 pints of blood received as hospital inpatient

MEDICARE SELECT

Medicare Select Coverage means Medicare supplement coverage through a proffered provider organization (PPO) or any other type of restricted network whose coverage has been approved by the state. A PPO is a health care provider or an entity that contracts with health care providers that establish alternative or discounted rates of payment and offers the insureds certain advantages for selecting the member providers. 

Examples of Medicare Select organizations include provider groups, hospital marketin plans, and groups that are formed or operated by insurers or third-party administrators. An insured must choose providers that belong to a network (except in cases of emergencies).

  •  With a Medicare Select plan, the insured agrees to use preferred providers, and in exchange, pay a lower premium

MEDICARE & MANAGED CARE

There are a number of Managed Care Organizations (MCOs) that have contracted with the Health Care Financing Administration to provide both Part A and part B services to Medicare recipient's. Medicare managed care plans are offered by private companies. A company can make a plan available to everyone with Medicare in a state or only be open in certain countries. A company also may choose to offer more than one plan in an area providing different benefits and costs. Each year a managed care company can decide to join or leave Medicare.

MEDICARE PART C (Medicare Advantage)

Medicare Advantage Plans are Medicare provided by an approved Health Maintenance Organization or Preferred Provider Organization. Some of these plans do not charge premiums beyond what is paid by Medicare and other do. These are coordinated care plans that generally offer people with Medicare additional benefits and coordinated care beyond the standard Medicare coverage (such as eye exams, hearing aids, dental care, and prescription drugs).

Another choice is a Private Fee For Service (PFFS) Plan, In this type of plan an individual may go to any Medicare-approved doctor or hospital that accepts Medicare payments. There insurance plan, rather than the Medicare Program, decides how much it will pay and what the Medicare enrollee pays for the services rendered. The plan could include extra benefits that are not covered under the original Medicare plan.

  • HMO's PPO's, and Private Fee-For-Services are all types of a Medicare Advantage Plan. In addition to premium, Medicare Advantage enrollees normally must pay a small copayment per visit or per service.
  • Medicare Part C does NOT cover Long-Term care

MEDICARE PART D

Medicare Part D is a prescription drug plan administered by one of several private insurance companies, each offering a plan with different costs and lists of drugs that are covered. Participation in Part D requires payment of a premium and deductible.

Long-Term Care Insurance

LONG-TERM CARE INSURANCE

Nursing home care is often covered by long-term care insurance. However, long-term care (LTC) refers to a broad range of medical, personal, and environmental services designed to assist individuals who have lost their ability to remain completely independent in the community. Although care may be provided for short periods of time while a patient is recuperating from an accident or illness, LTC refers to care provided for an extended period of time (normally more than 90 days).

Depending on the severity of the impairment, assistance may be given at home, at an adult care center, or in a nursing home. It is similar to most insurance plans in that the insured receives specified benefits in the event long-term care is required. Most LTC policies pay the insured a fixed dollar amount for each day the policy covers, regardless of what the care costs.

LONG-TERM CARE COVERAGES

As individuals age, they are likely to suffer from acute and chronic illnesses or conditions. An acute illness is a serious condition, such as pneumonia or influenza, from which the body can fully recover with proper medical attention. The patient may also need some assistance with chores for short periods of time until recovery and rehabilitation from the illness are complete. 

Some people will suffer from chronic conditions, such as arthritis, heart disease, or hypertension which are treatable but not curable illnesses. over time, a chronic condition frequently goes beyond being a nuisance and begins to inhabit a person's independence.

Most Long-Term, care insurance policies will pay benefits when you cannot perform at least two Activities of Daily Living (ADL). The Activities of Daily Living are series of basic activities performed by individuals on a daily basis necessary for independent living at home or in the community. There are many variations on the definition of the activities of daily living, but most organizations agree there are 5 basic categories:

  1. Personal Hygiene - Bathing, grooming and oral care
  2. Dressing - the ability to make appropriate clothing decisions and physically dress oneself
  3. Eating - the ability to feed oneself though not necessarily to prepare food
  4. Maintaining continence - both the mental and physical ability to prepare food
  5. Transferring - moving oneself from seated to standing and get in and out of bed


CATEGORIES OF LONG-TERM CARE

Skilled nursing care is continuous, around-the-clock care provided by licensed medical professionals under the direct supervision of a physician. Skilled nursing care is usually administered in nursing homes.

Intermediate nursing care is provided by registered nurses, licensed practical nurses, and nurse's aides under the supervision of a physician. It's provided in nursing homes for stable medical conditions that require daily, but not 24-hours, supervision. 

Custodia care provides assistance in meeting daily living requirements, such as bathing, dressing, getting out of bed, toileting, and so on.

HOME & COMMUNITY-BASED SERVICES

Home health care is care provided in the insured's home, usually on a part-time basis. It can include skilled care (e.g., nursing, rehabilitative, or physical therapy care ordered by a doctor) or unskilled care (e.g., help with cooking or cleaning).

ADULT DAY CARE

Adult day care is designed for those who require assistance with various activities of daily living, while their primary caregivers (usually family or friends) are absent.

RESPITE CARE

Respite care is designed to provide a short rest period for a family caregiver.

CONTINUING CARE

Designated to provide a benefit for elderly individuals who live in a continuing care retirement community.

TAXATION OF LTC BENEFITS

Qualified LTC Insurance contracts are treated in the same manner as accident and health insurance contracts. Amounts received under an LTC contract are excluded from income because they are considered amounts received for personal injuries and sickness. There is a limit on these amounts and these limits are adjusted for inflation annually.

LONG TERM CARE PARTNERSHIP PLAN

The Long-Term Care Partnership Program is a Federally-supported, state-operated initiative that allows individuals who purchase a qualified long-term care insurance policy or coverage to protect a portion of their assets that they would typically need to spend down prior to qualifying for Medical coverage. The difference between a long-term care Partnership Plan and a Non-Partnership Plan is the asset protection.

Important Notes

  • Home Health Care would be beneficial to a long-term care stoke victim who requires speech therapy administered at her home.
  • The primary purpose of Respite Care is to Provide Temporary Relief to the patient's primary caregiver.
  • Medicare Supplement Plan A does NOT cover the Medicare Part A deductible. However, the remaining Medicare Supplement plan is 50-100% of this cost. Deductible payments for the  Medicare Hospitalization Insurance are not a benefit.
  • Medicare supplement policies are provided by private insurers. A Medicare Supplement Policy is designed to fill in the gaps of Part A & Part B Medicare. Such as In-Hospital Deductibles Policies must NOT contain benefits which duplicate Medicare benefits. The first 3 pints of blood each year is a basic benefit of Medicare Supplemental Insurance. Open enrollment for Medicare Supplements begins at the age the individual becomes eligible for Medicare, which is typically age 65
  • Medicare supplement Plans F & G are the only Medicare Supplement Insurance plans that cover costs known as Medicare Part B excess charges. An excess charge is the difference between what a doctor or provider charges and the amount Medicare will pay.
  • An insurer can Cancel a Medical supplement plan after nonpayment of Premiums.
  • Premiums paid that exceed 7.5% of an insured's Adjusted Gross Income (AGI) are tax-deductible when paid for a Qualified Long-Term Care plan.
  • All "Long-Term" care policies must be guaranteed renewable. Long-term care coverage would be most appropriate for an individual who needs custodial care at home. Three levels of care provided by Long-Term Care policies are Skilled Nursing, Intermediate & Custodial Care.
  • Acute care is not covered under Long-Term Policies.
  • Assets are protected from Medicaid Recovery under a Long-Term Care Partnership plan. Non-Partnership Plans do not protect assets from Medicaid Recovery.
  • An assisted living facility would best suit an individual who needs some nursing care and supervision but not full-time care.
  • Talking is not considered an activity of daily living (ADL) for Long-Term Care insurance purposes.

* 1935 Social Security Act : Created to provide for United States citizens general welfare who are 65 years of age and older. The Act was enacted by the Senate & House of Representatives of the United States to enable individual states to make more adequate provisions for furnishing financial assistance to the aged, blind, dependent and crippled children, maternal and child welfare, publish health and to establish more adequate provisions for the administration of their unemployment compensation laws,

* 1868 Paul v. Virginia : This case, which the U.S. Supreme Court decided, involved one state's attempt to regulate an insurance company domiciled in another state.

* 1944 U. States v. SEUA : In the Southeastern Underwriters Association case, the Supreme Court ruled that the insurance industry is subject to a series of Federal Laws, many of which conflicted with existing state laws. As such, insurance is a form of interstate commerce to be regulated by the federal government.

* 1945 McCarran-Ferguson Act : This law made it clear that the states continued regulation of insurance was in the publics best interest. However, it also made possible the application of federal antitrust laws to the extent that [The insurance business] is not regulated by state law.

* 1958 Intervention by the FTC : In 1958 the Supreme Court held that the McCarran Ferguson Act disallowed such supervision by the FTC, a federal agency. Additional attempts have been made by the FTC to force further Federal Control, but none have been successful.

* 1959 Intervention by the SEC : The Supreme Court ruled that Federal securities laws applied to insurers that issued variable annuities and, thus, required these insurers to conform to both SEC and state regulations. The SEC regulated variable life insurance.

* 1868 Paul v. Virginia : This case, which the U.S. Supreme Court decided, involved one state's attempt to regulate an insurance company domiciled in another state.

* 1970 Fair Credit Reporting Act : Requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about Any Investigations that are being made upon completion of the application.

* 1994 U. States Code (USC) Section 1033 & 1034.
According to 18 U.S.C. 1033 & 1034 : It is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully engage or participate (in any capacity) in the business of insurance without first obtaining a "Letter of Written Consent to Engage in the Business of Insurance" from the regulating insurance department of the individual's state of resistance.

* 1999 Financial Services Modernization Act. :  In 1999 Congress passed the Financial Services Modernization Act, which repealed the Glass Steagall Act. Under this new legislation, commercial banks, investment banks, retail brokerages and insurance companies can now enter each other's lines of business.

* 2001 Uniting & Strengthening America by Providing Appropriate Tools Required to Intercept & Obstruct Terrorism Act. : The Patriot Act, which amends the Bank Secrecy Act (BSA), was adopted in response to the September 11, 2001, terrorist attacks. The Patriot Act is intended to strengthen U.S. measures to prevent, detect, and deter terrorists and their funding. The act also aims to prosecute international money laundering and the financing of terrorism. These efforts include anti-money laundering (AML) tools that impact the banking, financial, and investment communities.

* 2003 Do Not Call Implementation Act. : The Do Not Call Registry allows consumers to include their phone numbers on the list to which telemarketers cannot make solicitation calls.

* 2010 Patient Protection & Affordable Care Act (PPACA) : Often shortened to the Affordable Care Act (ACA), it represents one of the most significant regulatory overhauls and expansions of health insurance coverage in U.S. history.

Personal Notes From: Michigan Pre-licensing Education - Life, Accident and Health Insurance course has been approved by the Michigan Department of Financial Services as meeting the mandatory 20-hour requirement for Life and 20-hour Requirement for Health | XCEL Solutions LLC. Provider ID#: 0950 Course ID#: 60731/60732

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