HACE 3

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JerrahAnn
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HACE 3
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2010-12-03 10:15:52
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  1. National Health Expenditures
    • Pay more depending on income
    • Impacting all incomes
    • 84-85% insured
    • 14-15% uninsured
    • 72% insured private insurance
    • 20-25% insured by government provided insurance
  2. Out-of-Pocket Payments
    • Most common in 1st half of 20th century
    • Paid physicians and other healthcare providers in cash or through barter
  3. Individual Private Insurance
    • A 3rd party insurer is "added to the picture"
    • Requires 2 transaction
    • - A premium payment from individual to an insurance plan, then a reimbursement payment from the insurance plan to the provider
  4. Employment Based Private Insurance
    • During WWII, with the labor shortage, companies competing for workers began to offer health insurance as a fringe benefit
    • After the war, unions picked up on this
    • Government viewed as a tax-deductible business expense and employer portion is not taxable income to the employee
    • Government financing
  5. 7 Factors or Rise in Healthcare
    • 1. Increasing use of costly high-tech medicine
    • - Equipement
    • - Testing
    • - Drugs and Treatment
    • 2. The high cost of treating such illnesses as AIDS and cancer
    • 3. Aging of the population
    • 4. Fraudulent practices by some providers
    • 5. The large # and high cost of malpractice suits
    • 6. The administrative cost of complying with government regulations
    • 7. The practice of defensive medicine (unnecessary testing)
  6. 7 Reasons Physicians Base Medical Fees on
    • 1. The nature, extent, and complexity of service
    • 2. The time involved
    • 3. The office overhead (rent, neat, lighting, equipment, supplies, and salaries of personnel)
    • 4. The experience and expertise of the practitioner
    • 5. The area in which the physician practices
    • 6. The fee customarily charged by others in the community
    • 7. The circumstances and the economic status of the patient
  7. Cost-Control Methods
    • Insurance companies can...
    • - Raise deductibles and co-payment amounts
    • - Limit what they pay for each service
    • - Limit or exclude certain services
    • - Limit maximum total benefits
    • - Exclude people with pre-existing illness
  8. Provider Stratagies
    • Escalating cost and the prospect of greater government intervention have stimulated rapid and sweeping changes in the way in which the health market place is organized
    • Many hospitals are merging and hiring large number of physicians, and developing integrated managed care
    • - Will reduce competitions in the market place and eventually raise prices
  9. Employers Stratagies
    • Most health insurance is obtained through this
    • As a result of rising health care cost, many businesses are offering much less benefits such as:
    • 1. Switch to managed care plans
    • 2. Cut retiree benefits
    • 3. Requiring employees and retirees to pay part of the premium cost
    • 4. Many employers are now becoming self insured
  10. Premium
    The amount you and/or your employer, in addition to co-payments, coinsurance and deductibles, in exchange for insurance coverage
  11. Deductible
    • The amount you must pay before your insurance covers any expenses
    • Your insurance pays benefits only for losses that are greater than the deductible
    • The initial amount not covered by an insurance policy and thus the insurer's responsibility
    • Usually determined on a calendar year
    • On a few plans, based on a per illness or per accident basis
  12. Co-Payment
    • A way to share medical costs
    • You play a flat fee every time you receive a medical service
    • The insurance company pays the rest
  13. Co-Insurance
    • A requirement that you pay a percentage of all eligible medical expenses, above the deductible, that are due to sickness or injury
    • If an insurance company has an 80/20, then the insurance company pays 80% of the claim and you pay 20%
  14. Network
    • The group of physicians, hospitals, and other medical care professionals that a managed care plan has contracted with to deliver medical services to its members
    • In-network
    • Out-of-network
  15. Balance Billing
    Charging a patient the difference between what an insurer will pay and what the physician wants to charge for a service
  16. Pre-Certification
    The process of confirming eligibility and coverage before admissions, procedures, and services
  17. Eligible/Non-Eligible Expenses
    • Most insurance plans, whether they are fee-for-service or managed care plans, don't pay for all services
    • Some may not pay for prescription drugs
    • Others may not pay for mental healthcare
    • Covered services are those medical procedures the insurer agrees to pay for
  18. Ancillary Provider
    The name given to those providing professional services such as laboratory tests and radiology exams
  19. Primary Care Physician (PCP)
    • A physician, such as a general practitioner or internist, an individual chooses to serve as his/her healthcare professional and handle a variety of health-related problems such as:
    • - Keeping a medical history and medical records on the individual, and of referring the person to specialists as needed
  20. Available Health Insurance Coverage
    • Individual and family plans
    • Short-term health insurance
    • Employers sponsored plans
    • Medicare/Medicaid
  21. Short-Term Health Insurance
    30 days to 6 months
  22. Medicare
    Elderly
  23. Medicaid
    • Low income families
    • Government funded
  24. Styles of Health Insurance
    • Health Maintenance Organization (HMO)
    • Participating Provider Organization (PPO)
    • Indemnity Plan
    • High Deductible Health Plan (HDHP) that may be paired with the financial product, a Health Saving Account (HSA)
  25. Health Maintenance Organization (HMO)
    • No deductible
    • Co-Payments
    • Primary Care Physician (PCP)
    • Network Restricted: no coverage for out-of-network
    • Must follow all rules
  26. Participating Provider Option (PPO)
    • Deductible
    • Co-Payments/Co-Insurance
    • Network for Physicians/Facilities/Ancillary Providers
    • In-Network vs Out-of-Network payments
    • Follow the rules to get most for your money- avoiding balance billing
  27. Indemnity (Fee-for-Service) Plan
    • An insurance plan in which the healthcare provider is separate from the insurer, who pays the provider or reimburses you for a specified percentage of expenses after a deductible
    • Typically pay 80% of the healthcare expenses after insured meets deductible
    • Amount paid on "usual, customary, and reasonable"
    • If doctor charged more the UCR, you may be reasonable for full amount in excess of UCR
    • Most flexible plan type of Health Plan
    • Deductible
    • Co-Insurance
    • Network for Physician/Facility/Ancillary Providers
    • Plan of the Past
  28. High Deductible Health Plan (HDHP)
    • High Deductible
    • Must satisfy entire deductible before payments
    • Low premiums
    • In-Network: 90/10 or 80/20
    • Out-of-Network: 70/30 or 60/40
  29. Health Savings Account (HSA)
    • You must be enrolled in a HDHP to be eligible for one
    • If you enroll in this insurance plan, you may contribute through payroll deduction on a pre-tax basis
  30. Budgeting Considerations for Healthcare
    • Out-of-Pocket expenses are likely to occur each year
    • - The average was about $1,800 per person in 2009
    • Costs tend to increase as people grow older
    • The appropriate amount to allocate should depend on the number of people in the family unit, how old they are, and the extent of insurance coverage
  31. Things to DO when Considering Healthcare
    • Understand your choices
    • Read written or website materials first
    • Make a list of questions
    • Ask questions
    • Make an "educated" choice
  32. Things NOT to do when Considering Healthcare
    • Choose a plan based only on the premium cost
    • Choose a plan without doing anything from the "Do-List"
    • Be afraid to ask questions (let the experts help you)
    • Treat this decision lightly
  33. Goals to Healthcare
    • Cover more than 94% of all Americans
    • Bars insurance companies from discriminating based on pre-existing conditions, health status, and gender
    • Creation fo health insurance exchanges
    • - Should create more competition in the market
    • - Premium costs should fall
    • Tax credits and cost sharing for insured lower and middle income households
  34. Changes to Healthcare
    • Empowers the Department of Health and Human Services and state insurance commissioners to conduct reviews of insurance plans and premiums
    • - Makes sure they follow the rules
    • Maintain current funding levels for the Children's Health Insurance Program (CHIP) up to 2015
    • Increase compensation for primary care doctors in Medicaid
  35. Implementation 2010
    • Immediate access to insurance for the uninsured with pre-existing condition through the "high risk" pool
    • - Can drive up the prices for people with pre-existing conditions
    • Small businesses that buy health insurance for employees can claim up to 35% in tax credit
    • - 25% for small nonprofits
    • Eliminates life time limits on health insurance plans
    • Dependent coverage of children extended to age 26
    • Review of health plan premium increases
    • - Insurers will have to justify unreasonable premium increases
    • Consumer Website- Department of Health and Human Services will develop a website to help residents identify health coverage options
    • Tax of 10% on indoor tanning services
    • $250 rebate for those who fall within the Medicare Donut Hole
  36. Implementation 2011
    • 10% Medicare bonus for primary care physicians
    • Freezes 2011 Medicare Advantage payments to 2010 levels
    • 50% discount on brand name drugs within Medicare Part D
    • Employers need to disclose healthcare coverage costs in the W-2 form
    • HSA withdrawals for non-qualified medical expenses (Below age 65) will be taxed at 20%
    • Grants for small employers to establish wellness programs
    • Nutritional labeling- requires nutritional consent of standard menu lists at chain restaurants and food in vending machines
  37. Implementation 2014
    • Elimination of health insurance annual limits
    • Establishment of health insurance exchanges
    • - Standardized health insurance packages
    • - Tax credits for individual purchase
    • - Choice through multi-state plan and nation wide health plans
    • Penalty for being uninsured $95 (rising to a maximum of $2250 per family by 2016)
  38. Coverage Mandatory?
    • Certain religious groups can opt out
    • Many states are filing lawsuits claiming mandatory coverage to be unconstitutional
    • No provision for reduction of insurance premiums or healthcare costs
  39. Family Owns 3 Dwellings in its Lifetime
    • Starter home
    • Full-nest home
    • Empty-nest home
  40. Starter Home
    • Low cost
    • Small
  41. Full-Nest Home
    • High cost
    • More space
  42. Empty-Nest Home
    • Smaller
    • Low upkeep
  43. 3 Characteristics to Consider when Financing a Home
    • Mortgage loan principal- amount you're borrowing from a bank
    • Maturity or term of the loan- how long the loan is for
    • - The longer the loan, the more you pay in interest
    • Interest rate- how much you're being charged to have loan
  44. Fixed Rate Mortgage Advantages
    • Stable payment
    • Long-term tax advantages
    • Shield from future interest rate increases
  45. Fixed Rate Mortgage Disadvantages
    • Interest rate higher
    • Monthly payment higher
    • No benefits if market interest rates decrease
    • Limited availability during some periods
  46. 40-Year Fixed Rate
    • Borrower stretches out payments
    • Slightly higher interest rates
    • Good for only first-time buyers who don't plan on staying in the house for more than a few years
  47. 40-Year Fixed Rate Advantages
    Lower monthly payment
  48. 40-Year Fixed Rate Disadvantages
    Over life of mortgage, increase amount paid in interest
  49. Graduated Payment Mortgage Advantages
    • Lower initial monthly payment
    • Families may qualify for this when not others
    • Known, moderate increases in monthly payments
  50. Graduated Payment Mortgage Disadvantages
    • Higher total interest costs over the life of the loan
    • No benefits if interest rates decrease
    • Negative amortization
  51. Negative Amortization
    • Occurs when the mortgage interest rate rises but the mortgage payment remains the same, the mortgage payment does not cover the interest that is being charged for that month
    • Occurs during the "stair step" process
  52. Adjustable Rate Mortgage
    • Interest rate is made up of 2 parts:
    • - Index
    • - Margin
    • Frequency of rate change or adjustment interval tells you how often the interest rate can change
    • - Can be as often as every 3 months to 3-5 years
    • Rate cap
  53. Index
    • Measure of interest rates generally
    • - Rates on 1-year constant-maturity Treasury securities
    • - Cost of Funds Index (COFI)
    • - London Interbank Offered Rate (LIBOR)
  54. Margin
    Extra amount that lenders add on
  55. ARM Interest Rate=
    Index + Margin
  56. Periodic Cap (x)
    In a given interval (time period) the interest rate can only change by x% points
  57. Overall or Lifetime Cap (y)
    • Maximum that the interest rate can ever change (up or down)
    • Adding y% will be the highest interest rate that it could ever have
    • Subtracting y% will be the lowest interest rate that it could ever have
  58. Possibilities with Rate Cap
    • Frequency of payment change
    • - How often the payment can change
    • - Problem of negative amortization, if payment changes less frequently than the rate change
    • - You want the rate change and payment change to be at the same time
    • Payment caps
    • - Limit on the monthly payment increase that may result from a rate adjustment
    • - Problem of negative amortization
  59. Adjustable Rate Mortgage Advantages
    • Initial interest rates are lower
    • Initial monthly payment is lower
    • Some long-term tax advantages
    • More available during certain periods
    • Caps reduce uncertainty
    • When interest rates are high and you expect the rates to drop, this mortgage avoids the cost of refinancing to get lower rates
  60. Adjustable Rate Mortgage Disadvantages
    • Uncertainty about future interest rate and monthly payments
    • Negative amortization (with frequency of payment change that differs from frequency of rate change; with payment cap)
    • May be higher total cost than fixed if rates increase
  61. Hybrid Adjustable Rate Mortgage
    • These are a mix of a fixed-rate period and an adjustable-rate period
    • The interest rate is fixed for the first several years of the loan; after that, the rate could adjust annually
    • Example: 5/1
    • - 5= number of years that interest rate is fixed
    • - 1= interval after the fixed rate period
    • - Interest rates can change once a year, every year AFTER the first 5 years
  62. Hybrid Adjustable Rate Mortgage Advantages
    Benefit from lower rate if borrower doesn't expect to be in the home much longer than the fixed-rate period
  63. Hybrid Adjustable Rate Mortgage Disadvantages
    • After fixed rate period, the borrower assumes the interest rate risk
    • Beware of prepayment penalty if you plan to refinance after fixed rate period
  64. Interest-Only Payment Adjustable Rate Mortgage
    • Allows you to pay only the interest for a specific number of years
    • After that, you must repay both the principal and the interest over the remaining term of the loan
  65. Interest-Only Payment Adjustable Rate Mortgage Advantages
    Benefit from lower payment if borrower doesn't expect to be in the home much longer than the interest-only period
  66. Interest-Only Payment Adjustable Rate Mortgage
    • After the period, the borrower assumes the principal and interest payments= much higher payment
    • Not accumulating any equity during the period (does not change the amount you owe on your mortgage)
  67. Payment-Option Adjustable Rate Mortgage
    • Allows you to choose among several payment options each month
    • Options typically include:
    • - A traditional amortizing payment of principal and interest
    • - An interest-only payment
    • - A minimum payment that may be less than the amount of interest due that month (GPM)- would result in negative amortization
    • * Must be able to handle mortgage to use advantages and disadvantages
  68. Payment-Option Adjustable Rate Mortgage Advantages
    Flexible to deal with economic circumstances
  69. Payment-Option Adjustable Rate Mortgage Disadvantages
    Potentially lose much of tax advantages (determined by which method used predominantly)
  70. Balloon Mortgage Advantages
    • Initial interest rates lower
    • Initial monthly payment lower
    • Stable payment for several years
    • For some families, may be easier to qualify for
  71. Balloon Mortgage Disadvantages
    • Must refinance at Balloon time
    • Uncertainty about getting a new loan at Balloon time
    • May include no equity build-up
  72. Growing Equity Mortgages
    • Pre-payment is automatically planned
    • Applies to conventional or fixed rate mortgage
  73. Growing Equity Mortgage Advantages
    Allows homeowner to pay mortgage down more quickly (equity grows faster)
  74. Growing Equity Mortgage Disadvantages
    Less flexible than just prepaying your fixed rate mortgage
  75. Discount Points=
    Amount of points x loan amount
  76. Loan Origination Fees
    Amount of fees x loan amount
  77. Yearly Mortgage Cost
    • Locate the monthly mortgage cost in chart
    • Monthly cost x 12
  78. Otto von Bismarck- Chancellor
    • America's Social Security program is based on the original design in Germany (1889)
    • Retirement age was originally 70
    • Germany lowered the age to 65 in 1916
  79. Retirement
    When you can afford to do nothing
  80. Retirement Planning
    • Think about what your financial situation will be
    • - Retirement income
    • - Retirement expenses
    • - Risks in retirement
  81. Retirement Income
    • Social Security
    • Pension plans
    • Investments (personal savings)
    • Income from working...
  82. Basic Expenses of Retirement
    • Living
    • - Housing (Rent/Mortgage, utilities, maintenance)
    • - Food
    • Healthcare
    • Transportation
    • Taxes
    • - Property taxes
    • - Up to 85% of Social Security may be taxable
  83. Discretionary Expenses of Retirement
    • Travel
    • Entertainment
    • Hobbies
    • Club Memberships
    • Gifts/Family
  84. Money Needed For Retirement Depends On...
    • Age at retirement
    • Health status and life expectancy
    • Goals
    • Lifestyle decisions
    • Available resources
    • Income sources
  85. Financial Planning Model: 5 Key Variables
    • 1. Age at retirement
    • 2. Number of years in retirement
    • 3. Amount of money currently saved
    • 4. Amount of annual income needed
    • 5. Rate of return on investments
  86. Risks in Retirement
    • Longevity
    • Inflation
    • Rising Healthcare costs
    • Timing and amount of investment withdrawls
  87. Baby Boomers
    • Born from 1946-1964
    • They are altering the financial planning and public policy environments
    • We must plan now for longer retirements
  88. Population Pyramid
    • Retiring baby-boomers are putting a strain on the Social Security System
    • Oldest baby boomer age is 64 today
    • Youngest is 46
  89. Pay as You Go- Social Security
    • Current benefits are primarily funded by current revenues
    • If we have more people working than collecting benefits, we are in a positive cash flow
  90. Social Security and Demographic Change
    • Not intended to be only source of retirement funds, but currently:
    • - Payments compromise 50% or more of the income that is received by 65% of older Americans
    • - Payments are the sole source of income for 20% of older Americans
  91. 3-Legged Stool
    • 3 Main areas you needed to focus on for planning for retirement:
    • - Social Security Benefits
    • - Employer-Sponsored Retirement Plans
    • - Personal Savings
  92. Social Security Benefits
    • Play a critical role for most seniors
    • Only source of retirement income for 20% of older Americans
    • For 65% of Americans, Social Security income is half or more of their retirement income
    • Average monthly benefits for current payment status is $1068
  93. Employer-Sponsored Retirement Plan
    • There are plans that you have as part of your employment benefits with your employer
    • There are generally 2 types:
    • Defined Benefit Plans (traditional pensions)
    • Defined Contribution Plans (employee and/or employer)
  94. Defined Benefit Plans
    • Specifies the monthly benefits paid at retirement
    • Paid out regardless of how well (or poorly) the retirement funds are invested
    • Monthly benefits depend on a formula that considers:
    • - Number of years of employment with the business or organization
    • - Age at retirement
    • - Pre-retirement salary (last few years)
    • "Vesting" is usually required
    • - Must work a certain number of years to be eligible to receive the pension
  95. Defined Contribution Plan
    • Increasingly common
    • A pension plan specifying the contributions that both employer and employee must make; it makes no promises concerning the size of the benefits at retirement
    • - The employee (and often the employer) make regular contributions to their own retirement fund
    • Retirement benefit depends on:
    • - The employee and employer contributions
    • - Age at retirement
    • - Number of years of employment with the business or organization
    • - Performance of the investments made
    • No "vesting" for employee contributions
    • Vesting requirement IS common for employer portion
  96. Shift from Defined-Benefit to Defined-Contribution
    • Puts much of the responsibility and risk on the employees
    • - Must contribute to receive retirement check
    • - Mut make investment portfolio decisions
    • Many view this shift favorably
    • - You can take it with you to new jobs
  97. 401 K
    • For employees of money making businesses and government
    • Tax deferred
  98. 403 B
    • Non-Profit Organizations
    • Tax deferred
  99. Keogh, SEP-IRA, and SIMPLE IRA
    For small business owners and self-employed
  100. Pension Protection Act of 2006
    • Requires defined benefit plans to fully fund their future pension obligations
    • Strengthens the rules that defined benefit pensions must follow so that they are more likely to meet obligations
    • Makes it easier for companies to automatically enroll workers into company sponsored savings plans
    • Encourages employees to make use of various salary reduction plans, but setting higher contribution limits
  101. Personal Savings
    • This is the money that you are putting away on your own: savings and investments
    • Median household net worth of householders age 65 and over was $239,400 including the house
  102. Types of Personal Savings
    • Taxable Accounts
    • Retirement Accounts
    • - IRA
    • - Roth IRA
    • Annuities
    • Life Insurance
  103. Four Pillars of Financial Security
    • Social Security
    • Retirement plans and individual savings
    • Continued earnings from employment
    • Health insurance coverage
  104. Social Security Background
    The largest federal government policy (or set of policies) affecting family economic well-being
  105. History of Social Security
    • 1935- Program enacted under President Franklin Roosevelt's "New Deal"
    • - Compulsory "contributions"
    • - "Old age Insurance"
    • - Pay-as-you-go financing
    • - "Proportional" payroll tax
    • - Benefits disproportionate to "contributions"
    • Myth of the "Insurance trust fund" begun
    • 1965- Medicare and Medicaid added
    • 1979- "Solvency Crisis" I
  106. Types of Social Security Benefits
    • Old age (retirement) benefits
    • - To cover worker
    • - To worker's spouse(s)
    • Survivor's (widow's/widower's) benefits
    • Dependents' benefits
    • Disability benefits
    • Health insurance benefits
    • - Medicare
  107. Medicare
    • People 65 or older
    • People under 65 with certain disabilities
    • People of any age with End-Stage Renal Disease (ESRD)- permanent kidney failure requiring dialysis or a kidney transplant
  108. Medicaid
    • Serves low income individuals
    • Jointly funded by state and federal government
  109. Medicare: Part A
    • Hospital Insurance
    • Hospice Care
  110. Medicare: Part B
    • Medical Insurance
    • - Doctor services
    • - Some preventative services
  111. Medicare: Part C
    • Private Plans
    • - Extra Coverage (dental, vision, hearing, etc)
  112. Medicare: Part D
    Prescription Drug Plan
  113. Everyone has to pay into Social Security?
    • Most workers are required to participate in Social Security
    • Workers NOT required to participate in Social Security
    • - Federal employees who were hired before 1984 (covered by the Civil Service Retirement system)
    • - Employees of state and local governments who have chosen not to be covered
  114. Contributions to Social Security
    • FICA tax rate is 7.65% for employees, and 15.30% for self-employed people
    • The rates are broken down into:
    • - 6.2% (Social Security portion) on earnings up to the maximum taxable amount of ($106,800)
    • - 1.45% (Medicare portion) on all earnings
  115. Eligibility to Receive Benefits
    Must contribute for a minimum of 40 quarters over a lifetime (equivalent to 10 work years)- does not need to be consecutive
  116. Social Security Benefits are Based on...
    • Year of birth
    • Your annual average earnings
    • Age at which you begin to collect benefits
  117. Full (Normal) Social Security Benefits
    • Historically age 65
    • 1943-1954- age 66
    • 1955-1959- age 66+ (2, 4, 6, 8, 10) months
    • 1960-now- age 67
    • Benefits increase according to cost of living
  118. Early Retirement Benefits Available at Age 62
    Benefits are reduced if Social Security received before full retirement age

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