Front Back
how is healthcare different from other services?
-need v. luxury -unpredictability -asymmetry of info
modes of paying for healthcare
-out of pocket payments -individual private insurance -employment-based private insurance -government financing
out of pocket payment
o  Most common in 1st half of 20th century o  Pay physicians and other healthcare professionals in cash or through barter
individual private insurance 
o  Third party (insurer) is added to the picture o  Requires two transactions:
individual private insurance: 2 transactions 
1. a premium payment from individual to insurance plan  2. a reimbursement payment from insurance plan to provider
employment based private insurance 
o  During WWII companies began to offer health insurance as a fringe benefit; after the war, unions picked up the trend o  Government viewed as a tax deductible business expense and employer portion is not taxable income to the employee
factors possibly related to rise in healthcare
• Increasing use of costly high-tech medicine • High cost of treating illnesses • Aging of population • Fraudulent practices by some providers • Administrative cost of complying with government regulations • Large number and high cost of malpractice suits • Practice of defensive med…
physicians generally base their fees on
• The nature, extent, and complexity of service • The time involved • The office overhead • The experience and expertise of practitioner • The area in which the physician practices • The fees customarily charged by others in the community • The circumstances and economic status of t…
cost control methods: insurance co.
- They can raise deductibles and copayment amounts - Limit what they pay for each service - Limit or exclude certain services - Limit maximum total benefits Excludes people with preexisting conditions
cost control methods: provider strategies 
- Escalating cost and the prospect of greater government intervention -Hospitals are merging and hiring large numbers of physicians, and developing integrated managed-care
cost control methods: employer strategies
- Most heath insurance is obtained through employers. - As a result of rising health care cost many business are offering much less benefits
benefit changes
o  Switch to managed-care plans o  Cut retiree benefits o  Requiring employees and retirees to pay part of the premium cost. o  Many employers are now becoming self-insured.
premium 
- the periodic payment made on an insurance policy - the amount you and/or your employer pay - this is in addition to co-payments, coinsurance and deductibles, in exchange for insurance coverage.
deductible 
- the initial amount NOT covered by an insurance policy and thus the insured’s responsibility - usually determined on a calendar year; few plans on a per-illness or per-accident basis - you must meet your deductible before your plan begins to pay benefits
Participation (Coinsurance)
- A provision stipulating that the insurer will pay some portion of the amount of the loss in excess of the deductible rather than the entire amount - Stop-loss provision: Places a cap on the amount of participation required - Differs from copayment
co-payment 
a fixed dollar amount that you pay each time for certain services
styles of health insurance 
-indemnity plan -HMO -PPO -POS -HDHP
Indemnity Plan
- Fee-for-service plan - Healthcare provider is separate from the insurer - Amount paid based on “usual, customary, and reasonable” - Most flexible plan type of health plan - A “plan of the past”
HMO (health maintenance organization) 
- No annual deductible - Low copayments - Low premium
group HMO
o  From a central location (larger cities) o  Cannot always choose physician and other medical personnel
individual practice association 
o  Physicians practice from their own offices and with hospitals that are affiliated with the IPA o  Have some choose over physician and hospitals
Preferred Provider Option (PPO)
- Specific, set schedule of fees - 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 – avoid balance billing
Point of service (POS)
Has some of the qualities of HMO and PPO plans with benefit levels varying depending on whether you receive your care in or out of the health insurance company's network of providers.
high-deductible health plan (HDHP)
- High Deductible (must satisfy entire deductible before payments) - Low Premiums - Typically pair with a health savings account
Things to DO when choosing healthcare
- Understand your choices - Read written materials first - Make a list of questions - Ask questions - Make an “educated” choice
Thing NOT to do when choosing 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 - Treat this decision lightly
Goals of Affordable Healthcare Act 
- Cover >94% of all Americans - Bars insurance companies from discriminating - Creation of health insurance exchanges - Tax credits and cost sharing for insured lower & middle income households
2010 implementation of affordable healthcare act
o  Immediate access to insurance for the uninsured o  Eliminates life time limits on health insurance plans o  Dependent coverage extended to age 26
2011 implementation of affordable healthcare act
Employers need to disclose healthcare coverage costs in the W-2 form
2012-13 implementation of affordable healthcare act
o  Health Flexible savings account contributions limited to $2500 o  2013 - $3,250 individual; 6,450 family
2014 implementation of affordable healthcare act
o  Elimination of health insurance annual limits o  Establishment of health insurance exchanges o  Standardized health insurance packages o  Tax credits for individual purchase o  Choice through multi-state plan & nation wide health plans o  Penalty for being uninsured $95
Affordable Healthcare Act- Mandatory?
- Certain religious groups can opt out - Many states filed lawsuits claiming mandatory coverage to be unconstitutional –Supreme Court decision - No provision for reduction of insurance premiums or healthcare costs
3 dwellings of a typical family 
- Starter home – low cost, small - Full-nest home – high cost, more space - Empty-nest – smaller, low upkeep
Macroeconomic factors 
- Wide range of financing options - Economic conditions
3 characteristics to consider when financing a home 
•      Mortgage loan principal •      Maturity or term of the loan •      Interest rate
Types of Mortgages 
- Fixed Rate Mortgages - Graduated Payment Mortgages - Adjustable Rate Mortgages (ARM) - Balloon Mortgages - Growing Equity Mortgages
Advantages of fixed rate mortgages 
•      Stable payment •      Long-term tax advantages •      Shield from future interest rate increases
Disadvantages of fixed rate mortgage 
•      Interest rate higher •      Monthly payment higher •      No benefits if market interest rates decrease
Advantages of GPM
• Lower initial monthly payment • Families may qualify for this when not others • Known, moderate increases in monthly payments Disadvantages of GPM
Disadvantages of GPM
• Higher total interest costs over life of loan • No benefits if interest rates decrease • Negative amortization
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.
ARM
• Interest rates on ARM is made up of two parts: index and margin • Index: measure of interest rates generally • Margin: extra amount that lenders add • Index+margin= ARM interest rate • Frequency of rate change or adjustment interval - Rate cap (x/y)
ARM Advantages 
• Initial interest rate lower • Initial monthly payment lower • Some long-term tax advantages • More available during certain periods • Caps reduce uncertainty • ARMs avoid the cost of refinancing to get lower rate
ARM Disadvantage 
• Uncertainty about future interest rate and monthly payments • Negative amortization • May be higher total cost than fixed if rates increase
Hybrid ARMs
- 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.
Hybrid ARMs advantage 
benefit from lower rate if borrower doesn’t expect to be in the home much longer than the fixed –rate period
Hybrid ARMs disadvantage 
after fixed rate period the borrower assumes the interest rate risk; beware of prepayment penalty if you plan to refinance after fixed rate period
Interest only payment ARM
- 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.
Interest only payment ARMs advantages 
benefit from lower payment if borrower doesn’t expect to be in the home much longer than the interest-only period
Interest only payment ARMs disadvantage 
- after interest-only period the borrower assumes the principal and interest payments—much higher payment - not accumulating any equity during the interest-only period (does not change the amount you owe on your mortgage
Payment option ARM
ARM that allows you to choose among several payment options each month. 
Payment option ARM advantages 
Flexible to deal with economic circumstances
Payment option ARM disadvantages 
Potentially lose much of tax advantages (determined by which method used predominantly)
Balloon Mortgage advantages 
•      Initial interest rate lower •      Initial monthly payment lower •      Stable payment for several years •      For some families, may be easier to qualify for
Balloon Mortgages disadvantages 
• Must refinance at Balloon time • Uncertainty about getting a new loan at Balloon time • May include no equity build-up
Growing Equity Mortgage 
• Pre-payment is automatically planned • Applies to conventional or fixed rate mortgage
Growing Equity Mortgage: advantages 
allows homeowner to pay mortgage down more quickly (equity grows faster)
Growing Equity Mortgages: disadvantages 
less flexible than just prepaying your fixed rate mortgage

Access the best Study Guides, Lecture Notes and Practice Exams

Login

Join to view and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?