Health and Disability Insurance Basics
Basically, health insurance provides funds for paying medical expenses
while disability insurance replaces income lost as a result of illness
or injury. A number of plans for both health and disability insurance
are available, offering a broad range of coverage, deductible amounts,
pay out limits, and premiums.
Below you will find more specific information regarding both health
and disability insurance, provided by the Insurance Information
Institute, Inc. As you review this information, please feel free
to call us if you have questions or concerns that are not addressed.
What kinds of health insurance are there?
There are essentially two kinds of heath insurance: Fee-for-Service
and Managed Care. Although these plans differ, they both cover an
array of medical, surgical and hospital expenses. Most cover prescription
drugs and some also offer dental coverage.
1. Fee-for-Service.
These plans generally assume that the medical professional will
be paid a fee for each service provided to the patient. Patients
are seen by a doctor of their choice and the claim is filed by either
the medical provider or the patient.
2. Managed Care.
More than half of all Americans have some kind of managed-care plan.
Various plans work differently and can include: health maintenance
organizations (HM0s), preferred provider organizations (PPOs) and
point-of-service (POS) plans. These plans provide comprehensive
health services to their members and offer financial incentives
to patients who use the providers in the plan.
What are the types of disability insurance?
There are two types of disability policies: Short-Term Disability
(STD) and Long-Term Disability (LTD):
1. Short-Term Disability policies (STD)
They have a waiting period of 0 to 14 days with a maximum benefit
period no longer than two years.
2. Long-Term Disability policies (LTD)
They have a waiting period of several weeks to several months with
a maximum benefit period ranging from a few years to the rest of
your life.
Disability policies have two different protection features that
are important to understand. They are:
1. Non-cancelable
This means they cannot be cancelled by the insurance company, except
for nonpayment of premiums. This gives you the right to renew the
policy every year without an increase in the premium or a reduction
in benefits.
2. Guaranteed renewable
This also gives you the right to renew the policy with the same
benefits and not be cancelled by the company. However, your insurer
has the right to increase your premiums as long as it does so for
all other policyholders in the same rating class as you.
In addition to the traditional disability policies, there are several
options you should consider when purchasing a policy:
Additional purchase options
Your insurance company gives you the right to buy additional insurance
at a later time.
Coordination of benefits
The amount of benefits you receive from your insurance company are
dependent on other benefits you receive because of your disability.
Your policy specifies a target amount you will receive from all
the policies combined, so this policy will make up the difference
not paid by other policies.
Cost of living adjustment (COLA)
The COLA increases your disability benefits over time based on the
increased cost of living measured by the Consumer Price Index. You
will pay a higher premium if you select the COLA.
Residual or partial disability rider
This provision allows you to return to work part-time, collect part
of your salary and receive a partial disability payment if you are
partially disabled.
Return of premium
This provision requires the insurance company to refund part of
your premium if no claims are made for a specific period of time
declared in the policy.
Waiver of premium provision
This clause means that you do not have to pay premiums on the policy
after youíre disabled for 90 days.
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Keeping Costs Down
In striving to reduce your insurance costs, remember that, as with
all other forms of insurance, your premium is generally directly
proportional to the amount of a particular coverage that you purchase;
that is, the more comprehensive your coverage, the higher your premium
will likely be. Likewise, the more coverage you purchase, the greater
are the benefits you enjoy at the time of a claim.
In addition, while your health insurance premiums are not directly
affected by your current health, doing all you can to maintain good
health will have a positive affect on your health insurance and
health care related costs.
Below are a few possibilities for keeping your health insurance
costs down:
• Limit your coverage
• Consider alternative forms of coverage: PPOs and HMOs
• Increase your deductible
• Increase your co-pay percentage
• Select higher pay out limits
• Open a medical savings account
• Safeguard your health
Health Tips
The following healthy living tips are compliments of Regence Blue
Shield of Idaho.
Warm up before you exercise
Warming up before you
exercise turns on the sweat glands, which act as the body’s
cooling system. When you’re sweating you’re less likely
to overheat while doing strenuous exercise. It also increases your
blood flow, which helps your heart cope with the higher physical
demands of a workout.
That computer could be dangerous
Many people spend
the day, and part of the evening, staring at a computer screen.
That can cause CVS – computer vision syndrome. Symptoms include
eye strain, headache, blurry near vision, slowness in changing focus,
and neck, shoulder and back pain. What can you do about it?
• Position your screen 4 to 9 inches below eye level. You may
also need to adjust your chair height.
• Locate your monitor directly in front of you and keep it
20 to 28 inches away from your eyes. Make sure your work area suits
you.
• If you’re typing from a document, position it at the
same distance as the screen.
• Limit glare. Put your lamp where it doesn’t reflect
in your screen. If you’re working near a window, adjust the
light by using a window blind.
• Clean the screen often.
• If you’re writing, use a large sized font. You can reduce
it later.
• Try to blink regularly. Use artificial teardrops, if needed.
• Regularly check your eyeglass prescription and tell your
eye doctor how much time you spend in front of a monitor. You may
need a special pair of glasses for computer work.
• Take a brief break every 45 minutes.
It’s barbecue season
Before using a gas grill for the first time each year, or any time
you fill the tank, check all connections for gas leaks. Mix a little
dish detergent with water; spray or brush the soapy water on all
connections joints, then turn on the gas. If bubbles form at the
joints, there’s a leak that needs to be repaired.
Get a good night’s sleep
To improve your chances of getting a good night’s sleep relax
for an hour or so before getting into bed. Read, listen to music,
or even take a warm bath. Don’t take work to bed with you.
Avoid strenuous exercise within a couple of hours of bedtime. Keep
your bedroom quiet, dark and cool (60 to 65 degrees is best). Don’t
drink caffeinated beverages after dinner. And try to establish a
regular sleep schedule.
Frequently Asked Questions
The following information is designed to answer the most frequently
asked health and disability insurance questions. Feel free to call
us if you do not find the information that you’re seeking.
• How do I pick a health plan? 
• What are the sources for replacing income due to extended
illness or injury?
How do I pick a health plan?
If your employer gives you a choice of plans or you need to purchase
your own coverage, it is crucial that you understand your health
insurance choices and pick the insurance that is best for you and
your family.
Here are some questions you should ask yourself when choosing a
health insurance plan:
How affordable is the cost of care?
• What is the monthly premium I will have to pay?
• Should I try to insure most of my medical expenses or just
the large ones?
• What deductibles will I have to pay out-of-pocket before
insurance starts to reimburse me?
• After Iíve met my deductible, what percentage of my
medical expenses are reimbursed?
• How much less am I reimbursed if I use doctors outside the
insurance companyís network?
Does the insurance plan cover the services I am likely to use?
• Are the doctors, hospitals, laboratories and other medical
providers that I use in the insurance companyís network?
• If I want to use a doctor outside the network, will the plan
permit it?
• How easily can I change primary-care physicians if I want
to?
• Do I need to get permission before I see a medical specialist?
• What are the procedures for getting care and being reimbursed
in an emergency situation, both at home or out of town?
• If I have a preexisting medical condition, will the plan
cover it?
• If I have a chronic condition such as asthma, cancer, AIDS
or alcoholism, how will the plan treat it?
• Are the prescription medicines that I use covered by the
plan?
• Does the plan reimburse alternative medical therapies such
as acupuncture or chiropractic treatment?
• Does the plan cover the costs of delivering a baby?
What is the quality of the insurance plan I'm looking at?
• How have independent government and non-government organizations
rated the plan? For example, the National Committee for Quality
Assurance ( http://www.ncqa.org ) issues a Consumer Assessment of
Health Plans (CAHPS) report for every medical plan and facility.
• What kind of accreditation has the plan received from groups
such as NCQA or the Joint Commission on Accreditation of Healthcare
Organizations (JCAHO) ( http://www.jcaho.org )?
• How many patient complaints were filed against the plan last
year and how many were upheld by state regulatory agencies like
the state insurance commission or the state medical licensing board?
• How many members drop out of the plan each year? State insurance
departments keep track of ìdisenrollment rates.
• Do the doctors, pharmacies and other services in the plans
offer convenient times and locations?
• Does the plan pay for preventive health care such as diet
and exercise advice, immunizations and health screenings?
• What do my friends and colleagues say about their experiences
with the plan?
• What does my doctor say about his or her experience with
the plan?
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How can I insure against loss of income?
If you were disabled and unable to work as a result of an accident
or illness, what would you and your family do for income?
Disability income insurance, which complements health insurance,
can replace lost income. At age 40, the average worker faces only
a 14 percent chance of dying before age 65 but a 21 percent chance
of being disabled for 90 days or more.
Three basic ways to replace income:
1. Employer-paid disability insurance
This is required in most states. Most employers provide some short-term
sick leave. Many larger employers provide long-term disability coverage
as well, typically with benefits of up to 60 percent of salary lasting
from five years to age 65, and in some cases extended for life.
2. Social Security disability benefits
This can be paid to workers whose disability is expected to last
at least 12 months and is so severe that no gainful employment can
be performed.
3. Individual disability income insurance policies
Other limited replacement income is available for workers under
some circumstances from workers compensation (if the injury or illness
is job-related), auto insurance (if disability results from an auto
accident) and the Department of Veterans Affairs.
For most workers, even those with some employer-paid coverage, an
individual disability income policy is the best way to ensure adequate
income in the event of disability. When you buy a private disability
income policy, you can expect to replace from 50% to 70% of income.
Insurers wonít replace all your income because they want
you to have an incentive to return to work. However, when you pay
the premiums yourself, disability benefits are not taxed. (Benefits
from employer-paid policies are subject to income tax.)
Key things to look for when you shop around:
1. The definition of disability
Some policies pay benefits if you are unable to perform the customary
duties of your own occupation. Others pay only if you are unable
to perform any job suitable for your education and experience. Some
policies define disability in terms of your own occupation for an
initial period of two or three years and then continue to pay benefits
only if you are unable to perform any occupation. "Own occupation"
policies are more desirable, but more expensive.
2. Benefit period
The benefit period is the amount of time you will receive monthly
benefits during your life. Experts usually recommend that the policy
you buy pay you benefits until at least age 65, at which point Social
Security disability will take over. If you are young, you may consider
buying a policy offering lifetime benefits because it will still
be relatively inexpensive.
3. A policy that will replace from 60% to 70 % of your total
taxable earnings
A higher replacement percentage, if available, is more expensive.
Evaluate your other sources of income before deciding how much disability
coverage you need.
4. Coverage for disability resulting from either accidental injury
or illness
An accident-only policy is less expensive but does not provide adequate
protection. Ideally, both accident and illness coverage should be
purchased.
5. A cost-of-living increase in benefits
You are buying a policy today that may not pay benefits for a decade
or more. Should you need those benefits, you will want them to have
kept pace with increases in the cost of living. (Some companies
also offer "indexed" benefits, keeping pace with inflation
after benefit payments begin.)
6. A policy paying "residual" or partial benefits
This type of policy is available so that you can work part-time
and still receive a benefit making up for lost income. A standard
feature in some policies, and added by a rider to others, a residual
benefits policy pays partial benefits based on loss of income without
an initial period of total disability.
7. Transition benefits
Offered by some companies, it can offset financial loss during a
post-disability period of rebuilding a business or professional
practice.
8. Ongoing coverage
A non-cancelable policy which will continue in force as long as
the premiums are paid; neither the benefit nor the premium can change.
A guaranteed renewable policy keeps the same benefits but may cost
more over time since the insurer can increase the premium if it
is increased for an entire class of policyholders.
9. Financial stability
Check the financial ratings of an insurer. Your insurance agent
or company representative will provide this information or you can
obtain it from rating agencies such as A.M. Best Company, Standard
and Poor's, Duff and Phelps Credit Rating Company and Moodyís
Investors Service.
10. Waiting period
Every disability policy imposes a waiting period, also known as
the elimination period. This is the number of days you must be disabled
before receiving benefits. If you are disabled during the elimination
period, you will not receive any benefits, even though you are not
able to work. If the elimination period is short, such as 30 or
60 days, the premium will be higher. A longer elimination period
may strain your finances more when you need it, but you will be
charged a lower premium. Most experts recommend that you select
an elimination period of 60 to 90 days. The first check is usually
paid 30 days after the waiting period.
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