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Risk Management

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• Types of Health Care
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• HMOs and PPOs
• Evaluating Insurance Companies
• Long-Term-Care Costs
• Medicare Coverage

Types of Health Care

Although many people take the necessary steps to ensure good health, its easy to take your health for granted. Yet the possibility of having to endure a lifelong illness or the loss of normal body functions does exist. And today, health problems can often mean high medical costs.

Staggering health-care costs have driven both the demand for and the price of medical insurance sky high. The availability of group coverage through employment has helped many Americans face such costs. However, people who are not currently covered by an employer have few affordable sources for group coverage. If you are not covered at work, inquire about coverage through your religious organization, professional organizations, or alumni association.

Individuals seeking medical coverage on their own can rely on an individual policy. And if youre elderly, you can also rely to a limited degree on the benefits provided under Medicare.


Basic health-care insurance covers hospital room and board, medical equipment and supplies, regular health-care services, and sometimes outpatient care, up to a specified limit. Unfortunately, it is not considered adequate medical coverage. The maximum benefit is not high enough to cover a long-term or catastrophic illness. And the benefits do not keep up with rapidly rising medical costs. Many advisors recommend adding a supplementary major medical plan or upgrading basic coverage to a comprehensive plan.

Major Medical

Major medical covers health-care costs after a high deductible has been met. After this, the insurer and the patient share medical costs, with the insurer usually bearing 70 to 80 percent of the expense, while the remaining portion, called coinsurance, is paid by the insured. Coinsurance is usually limited to a certain dollar amount, after which the insurer pays 100 percent. If major medical coverage with a low maximum benefit is offered by an employer, you can also purchase an excess major medical coverage policy to supplement the benefits of the company policy.

Comprehensive Medical

Comprehensive medical insurance combines basic coverage with a major medical plan. This eliminates the paperwork involved in having several health plans and may also reduce out-of-pocket costs because you have to satisfy only one deductible. The maximum benefit is specified in the policy. Be sure to review policy features carefully. In order to help keep premiums within reach, you may want to consider a deductible at the dollar amount for which you can safely self-insure. Remember, the cost and availability of an individual health insurance policy can depend on factors such as age, health (pre-existing conditions), and the type and amount of insurance purchased. In addition, a physical examination may be required.


Medicare is the U.S. governments health-care insurance program for the elderly. It is available to people aged 65 and older as well as certain disabled persons.

Part A, hospital insurance, provides basic coverage for hospital care as well as limited skilled nursing and home health care.

Part B, supplementary medical insurance, costs \$58.70 per month. It covers 80 percent of reasonable health-care costs after a \$100-per-year deductible has been satisfied.

© 2003 Emerald Publications

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