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Benefit Year. HMOs and PPOs operate on an annual cycle called the benefit year . Some benefit year cycles follow the calendar year, renewing each January 1. Others may renew in late summer or fall. The benefit plan renewal date is important, because it is the date the deductible resets , if your plan has one. From that day forward, you must satisfy your deductible for the new plan year. Knowing the benefit year renewal date is important. For example, let’s say it’s mid-June. Your benefit year ends on June 30 and renews on July 1. You met your $1000 deductible in March. Suddenly, your tennis elbow starts bothering you. It’s no emergency, but you go to your PCP and she schedules you for an MRI on July 2. If your MRI were scheduled prior to July 1, you would pay only the co-pay since you had met your deductible for the year. If it’s scheduled after July 1, your deductible has reset, so you are responsible for $1000 of the cost. Again, all plans are different and some don’t even have deductibles, but whenever possible, schedule doctor’s visits, tests and medical procedures to maximize your benefits . Costs Not Covered. Healthcare plans do not cover living costs while the insured is laid up or disabled from an illness or accident. However, many employers offer disability insurance. Maintaining adequate disability coverage is important because living costs can eat up savings and wealth quickly when you are sick or injured and no money is coming in from a job. Private Health Insurance. Private health insurance used to be prohibitively expensive, but has become much more affordable in recent years, so much so that some people are even opting out of their employer’s plan to purchase their own coverage. The advantage of private health insurance is that it allows a person to customize a plan to pay for just what they need. You may also be able to pay a lower premium if you choose a higher deductible. Reflect on Learning: If you don’t understand how your healthcare plan works, you can inadvertently run up thousands of dollars in medical bills that the insurer will not cover! Health care plans can be difficult to understand. What document provides a reliable information about a plan? Answer: The Summary of Benefits and Coverage. What is the significance of a plan’s network ? It is the plan’s approved roster of doctors, hospitals, clinics, and labs which the insured must use in the case of an HMO and is preferred to use in the case of a PPO. What is the significance of the Benefit Year? The deductible often resets and plan terms can change. If the plan documents are difficult to understand, call the insurer’s customer service and ask, ask, ask! Life Insurance It’s hard to believe now, but one day in the not too distant future you may be married with a couple of adorable little ones, a nice home, a car, and lots of cool stuff. Your family will love and depend on you — especially financially. Life may be going along swimmingly when all of the sudden out of nowhere you are struck by a meteor (or die in any other manner). What will become of your family now that they no longer have your income to rely on? Sadly, on top of dealing with losing you, your family could also lose their home if they are unable to pay the mortgage, or be forced to sell off assets and severely reduce their standard of living. Your children may not be able to afford a college education, and your surviving spouse may have to take on another job to make ends meet. Fortunately, there is a way to prevent this personal financial doomsday scenario: life insurance! PRODUCT PREVIEW
THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY 293
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