Health Insurance and Employee Benefits Concepts
Health Insurance and Employee Benefits Concepts tests the mechanics of medical expense coverage, disability income, and long-term care, plus the regulatory framework around group benefits - COBRA, HIPAA, ACA, §125, and HSA/HRA/FSA accounts.
Medical expense mechanics
- Deductible, then coinsurance (for example 80/20), then the out-of-pocket maximum. Preventive care is typically first-dollar in-network.
- Managed care: HMO (closed panel, gatekeeper, prepaid), PPO (network with in- and out-of-network benefits, no gatekeeper), POS (gatekeeper in-network with an out-of-network option), EPO (no out-of-network benefits).
- Reasonable and customary limits, preauthorization, tiers; ACA prohibits annual and lifetime dollar limits on essential health benefits.
Disability income
- Own-occupation versus any-occupation definitions; elimination period; benefit period; residual or partial disability; presumptive disability; offsets for Social Security and workers compensation.
- Business overhead expense and disability buy-out policies cover the business, not the individual.
Group benefits and regulation
- COBRA: employers with 20 or more employees; 18 months for termination or reduced hours, 29 months for extended disability, 36 months for dependents; 102% of premium; qualifying events.
- HIPAA: portability and creditable coverage, special enrollment, privacy.
- ACA: essential health benefits, dependent coverage to age 26, guaranteed issue, community rating, premium tax credits.
- §125 cafeteria plan: pre-tax qualified benefits, nondiscrimination testing, use-it-or-lose-it relaxed by a grace period or a $500 carryover.
- HSA requires a qualifying high-deductible plan, is portable, and is triple-tax-advantaged; HRA is employer-funded; FSA is employer-sponsored and forfeitable.
- LTC triggers on inability to perform 2 of 6 ADLs or cognitive impairment, certified by a health care practitioner; tax-qualified policies receive favorable treatment.
- Medicare Parts A–D and standardized Medigap plans.
Worked example
$1,000 deductible, 80/20 coinsurance, $5,000 out-of-pocket maximum that includes the deductible, and $30,000 of covered charges. The insured pays the first $1,000, then 20% of the remaining $29,000 = $5,800 - but the out-of-pocket maximum caps total cost-sharing at $5,000, so the insurer pays $25,000.
Traps that cost marks
Calling the coinsurance maximum the out-of-pocket maximum; applying the deductible to preventive care; assuming COBRA covers a 10-employee firm; treating an HSA as use-it-or-lose-it; forgetting disability offsets; assuming every LTC policy is tax-qualified.