George Washington University The Power of Advertising and Its Influence Research Paper Discuss the following:The power of advertising is in its persuasive

George Washington University The Power of Advertising and Its Influence Research Paper Discuss the following:The power of advertising is in its persuasive influence, and this influence can take several different forms. Research and explain one example of persuasive advertising within the last year that is unfair and deceptive and that violates the law in regard to product liability. Be sure to identify and explain the law in your answer. See Section 13-2: Advertising as a Contract Basis for Product Liability in your textbook. Provide support for your response.In relation to government enforcement of product warranty and liability claims, research the Internet or the Strayer Library for information about the latest activities by the Food and Drug Administration (FDA), Consumer Product Safety Commission (CPSC), and the National Highway Traffic Safety Administration (NHTSA). Analyze the current state of government regulation for product safety to determine whether each administrative agency is generally proactive or reactive. Provide one specific example within the last year from each agency. Chapter 15
Healthcare Reform:
Individual Health
Insurance
Coverages
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Agenda
• Defects in the Healthcare System in the United
States
• Basic Provisions of the Affordable Care Act
• Individual Medical Expense Insurance
• Individual Medical Expense Plans and Managed
Care Plans
• Health Savings Accounts
• Long-term Care Insurance
• Disability-Income Insurance
• Individual Health Insurance Contractual Provisions
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15-2
Healthcare Problems in the United
States
• The U.S. Healthcare delivery system has
four major problems:




Rising healthcare expenditures
Large number of uninsured in the population
Considerable waste and inefficiency
Harmful insurer practices
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15-3
Healthcare Problems in the United
States
• Problem 1: Rising Healthcare expenditures
– Healthcare expenditures in the United States
have increased substantially over time and are
growing faster than the national economy
– Estimated national health expenditures will
total $3.4 trillion in 2016, or 17.7 percent of
the nation’s GDP
– More than one in six dollars of the nation’s
income is spent on healthcare
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15-4
Exhibit 15.1 How the Healthcare System in the
United States Compares Internationally
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15-5
Healthcare Problems in the United
States (Continued)
• Reasons for the increase in spending include:









Advances in technology
Cost insulation because of third-party payers
Employer-sponsored health insurance
Fee-for-service defects
High administrative costs
Lack of transparency in cost and quality information
Cost shifting by Medicare and Medicaid
Rising prices in the healthcare sector
Defensive medicine
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15-6
Healthcare Problems in the United
States (Continued)
• Problem 2: Many people do not have health
insurance coverage
– 33 million people, or 10.4 percent of the U.S.
population had no health insurance coverage in
2015
– About 11 million adults became newly insured
under the ACA by December 2014
– Many people are uninsured because the coverage is
not affordable
– Many uninsured people did not explore new
coverage options and available financial assistance
under the ACA
– 37 percent of people who were eligible for coverage
were told they were ineligible
– Many low income people who are eligible for
Medicaid are not aware they are eligible
15-7
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Healthcare Problems in the United
States (Continued)
• Problem 3: Waste and inefficiency
– As much as 30 percent of healthcare spending
each year is wasted or unnecessary
• Sources of wasteful spending include:








Duplication of tests
Medical errors that are largely preventable
Unnecessary tests due to fear of lawsuits
High administrative costs and excessive and
redundant paperwork
Readmissions into hospitals because of
inadequate or ineffective initial treatment
Hospitalizations for preventable conditions
Fraud and overbilling by healthcare providers
Overuse of expensive medical technology and
emergency rooms
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15-8
Healthcare Problems in the United
States (Continued)
• Problem 4: Harmful insurer practices
– Some insurer practices are harmful to both
policyholders and applicants for insurance
• Examples include:
– Exclusions for preexisting conditions
– Rescission of insurance contracts to limit
benefits
– Lifetime or annual limits on benefits
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15-9
Basic Provisions of the Affordable
Care Act
• The Affordable Care Act:
– Has made health insurance available to millions
of uninsured Americans
– Provides substantial subsidies to uninsured
individuals and small businesses to make
insurance more affordable
– Contains provisions to lower health-care costs
in the long run
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15-10
Basic Provisions of the Affordable
Care Act (Continued)
• The Act promotes more consumer-friendly
insurer practices:








Lifetime limits and annual limits prohibited
Preexisting conditions prohibited
Rescission of insurance policies prohibited
Retention of coverage until age 26
Guaranteed access to health insurance
Grandfathered plans
Minimum medical loss ratio
Limited waiting periods
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15-11
Basic Provisions of the Affordable
Care Act (Continued)
• Individual mandate
– Beginning in 2014, most citizens and legal
residents must have qualifying health insurance
or pay a financial penalty
– In 2016, the penalty is the higher of $695 or
2.5 percent of income
– The new law also provides premium tax credits
so that eligible individuals can purchase
affordable health insurance and comply with the
law
– Certain groups are exempted
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15-12
Basic Provisions of the Affordable
Care Act (Continued)
• The ACA creates a Health Insurance
Marketplace in each state
– The exchange is a new transparent and
competitive insurance marketplace where
individuals and small firms can purchase
affordable and qualified health insurance plans
– Access to a Marketplace exchange is limited to
U.S. citizens and legal residents who are not
incarcerated
– State exchanges will enable people to
comparison shop for health insurance
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15-13
Basic Provisions of the Affordable
Care Act (Continued)
• The new law provides premium credits to
eligible individuals to make coverage more
affordable
– Eligibility is limited to U.S. citizens and legal
immigrants who meet the income limits
– Employees who have access to health insurance
through an employer’s plan are not eligible unless
the plan does not cover at least 60 percent of costs
– Premium tax credits and cost-sharing subsidies are
available to certain eligible low-income individuals
and families
– Beginning in 2015, firms with more than 100
employees must pay a fine for each employee that
obtains subsidized insurance through an exchange
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15-14
Basic Provisions of the Affordable
Care Act (Continued)
• Eligible small employers can receive
significant tax credits under the new law
– A tax credit of up to 50 percent of the
employer’s contribution is available if the
employer contributes at least 50 percent of
total premiums
– The employer must offer coverage to full-time
employees through the Small Business Health
Options Program (SHOP)
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15-15
Basic Provisions of the Affordable
Care Act (Continued)
• The ACA expands Medicaid to include
adults with incomes up to 138 percent of
the federal poverty level
– Millions of formerly uninsured persons have
acquired Medicaid coverage
– The Supreme Court ruled that a state cannot be
coerced into expanding its Medicaid program
under the ACA
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15-16
Basic Provisions of the Affordable
Care Act (Continued)
• The new law contains many provisions that
will improve the quality of health care and
lower costs, including:
– New incentives to rebuild the primary care
workforce
– A Prevention and Public Health Fund that will
invest in programs designed to keep Americans
healthy
– Establishing a patient-centered outcomes
research institute
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15-17
Basic Provisions of the Affordable
Care Act (Continued)
– Strengthening community health centers
– Enhanced screening procedures for health-care
providers to eliminate fraud and abuse
– Incentives for physicians to join together to
form “accountable care organizations”
– Reducing paperwork and administrative
expenses
– Paying physicians based on value and not
volume
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15-18
Basic Provisions of the Affordable
Care Act (Continued)
• In 2015, the CBO projected the Affordable
Care Act will cost more than $1.7 trillion
over the period 2016-2025
– The amount will be partly offset by penalties and
tax increases related to coverage
• Funding for the new law comes from:
– Savings in the Medicare and Medicaid programs
– Reduced payments to Medicare Advantage plans
– New fees on pharmaceutical firms and health
insurers
– Other taxes and penalties
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15-19
Individual Health Insurance
Coverages
• Individual medical expense insurance
protects an individual or family for covered
medical expenses because of sickness or
injury
– Plans are purchased by people who are not
employed, retired workers, and students
• Insurers selling policies in the Health
Insurance Marketplace must cover a
package of essential benefits and . . .
– Cannot impose an annual limit on benefits
– Cannot impose a lifetime dollar limit
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15-20
Basic Provisions of the Affordable
Care Act
• The Act requires insurers to cover essential
health benefits:









Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance use disorder services
Prescription drugs
Rehabilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease
management
– Pediatric services, including oral and vision care
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15-21
Basic Provisions of the Affordable
Care Act (Continued)
• Applicants have a choice of four benefit
categories:




The
The
The
The
bronze plan covers 60 percent of the benefit costs
silver plan covers 70 percent of the benefit costs
gold plan covers 80 percent of the benefit costs
platinum plan covers 90 percent of the benefit costs
• Each plan has annual out-of-pocket limits that
limit the amount insureds must pay in the form of
deductibles, coinsurance, copayments, etc.
• Catastrophic plans cover, on average, less than
60 percent of the total average cost of care and
are available only to certain people
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15-22
Individual Health Insurance
Coverages
• Individual expense plans provide a broad
range of benefits, including





Inpatient hospital benefits
Outpatient benefits
Physician benefits
Preventive services
Outpatient prescription drugs
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15-23
Individual Health Insurance
Coverages (Continued)
• Marketplace policies contain a calendar-year
deductible that has to be satisfied only once
during the calendar year
– All covered medical expenses can be applied
toward the deductible
• The purpose of the deductible is to eliminate
small claims and the high administrative cost
of processing them
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15-24
Individual Health Insurance
Coverages (Continued)
• A coinsurance provision states a
percentage of the bill in excess of the
deductible, which the insured must pay
out-of-pocket up to some maximum annual
dollar limit
– The purpose of coinsurance is to reduce
premiums and prevent overutilization of plan
benefits
• A copayment is a flat amount the insured
must pay for certain benefits, such as an
office visit or generic drug
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15-25
Individual Health Insurance
Coverages (Continued)
• The insured’s total out-of-pocket spending
is limited by an annual out-of-pocket limit
(also called a stop-loss limit), after which
the insurer pays 100 percent of eligible
expenses
• Common exclusions to Marketplace policies
include cosmetic surgery, long-term care,
hearing aids, and weight loss programs
• Insurers must provide consumers with
uniform information so that an accurate
comparison of plans can be easily made
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15-26
Individual Medical Expense Plans
and Managed Care
• Most individual medical expense plans sold
today are managed care plans
– A managed care plan provides covered medical
services to the members in a cost effective
manner, with heavy emphasis on cost control
• The most popular plan today is a preferred
provider organization (PPO)
– A PPO contracts with physicians, hospitals, and
other health-care providers to provide covered
medical services to policyholders at discounted
fees
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15-27
Health Savings Accounts
• A health savings account (HSA) is a tax
exempt account established exclusively for
the purpose of paying qualified medical
expenses
– The beneficiary must be covered under a highdeductible health plan to cover catastrophic
medical bills in order to qualify for an HSA.
– Contributions can be made by individuals, their
employers, and family members
– Contributions and annual out-of-pocket
expenses are subject to maximum limits
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15-28
Health Savings Accounts (Continued)
– The account holder can withdraw money from
the HSA tax-free for medical costs
– An HSA investment account in a qualified plan
receives favorable tax treatment
– Proponents argue that HSAs can help keep
health care costs down because consumers will
be more sensitive to costs, will avoid
unnecessary services, and will shop around
– Critics argue that HSAs will encourage insureds
to forego preventative care
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15-29
Long-Term Care Insurance
• Long-term care insurance pays a daily or
monthly benefit for medical or custodial care
received in a nursing facility, in a hospital, or
at home
– 44 percent of men over age 65 and 58 percent of
women will need nursing home care sometime
during their lifetime
• Most LTC insurance policies sold today are
tax-qualified
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15-30
Long-Term Care Insurance
(Continued)
• Expense-incurred (or reimbursement)
policies are the most common type of LTC
insurance policies
– These policies reimburse for actual charges up to
a daily limit
– Consumers have a choice of daily benefits, which
range from $50 to $350 or more
– Policies may cover a different amount depending
on the type of facility
– Policies may have limits on the total amount paid
over the lifetime of the policy
• Indemnity policies (or per diem policies) pay
a flat dollar amount per day regardless of
actual expenses
15-31
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Long-Term Care Insurance
(Continued)
• Some life insurance and deferred annuity
policies (also known as hybrid policies)
include coverage for certain LTC expenses
• LTC coverage is added to these policies in
several different ways, including:
– Adding a long-term care rider
– Through an accelerated death benefits provision
– Allowing the policyholder to withdraw part of
the current cash value to cover LTC expenses
– Providing a fixed amount of coverage after the
annuity value is spent on LTC expenses
– Through an alternative plan of care provision
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15-32
Long-Term Care Insurance
(Continued)
• Depending on the policy, LTC insurance
policies cover a wide range of services
including,






Nursing home care
Home healthcare
Respite care for a caregiver
Hospice care
Personal care in the home
Services in assisted living facilities, adult
daycare centers, and other community services
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15-33
Long-Term Care Insurance
(Continued)
• An elimination period is a waiting period
during which time benefits are not paid
• In a qualified LTC plan, a benefit trigger
must be met to receive benefits. Either,
– The insured is unable to perform a certain
number of activities of daily living (ADLs), or
– The insured needs substantial supervision to be
protected against threats to health and safety
because of a severe cognitive impairment
• Nontax-qualified policies often have more
liberal eligibility requirements and make
benefits available if a medical necessity
trigger is met
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15-34
Long-Term Care Insurance
(Continued)
• Some plans offer automatic benefit
increases to keep up with inflation
• Policies are guaranteed renewable
• Coverage is expensive
• Exclusions typically include:





Certain mental and nervous disorders
Alcoholism and drug addiction
Illnesses caused by an act of war
Treatment paid by the government
Attempted suicide or self-inflicted injury
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15-35
Long-Term Care Insurance
(Continued)
• Most insurers offer optional nonforfeiture
benefits, which provides benefits if the
insured lapses the policy
• Examples of common nonforteiture benefits
include:
– A return of premium benefit
– A shortened benefit period
• Long-term care insurance that meets
certain requirements receives favorable
income tax treatment
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15-36
Long-Term Care Insurance
(Continued)
• Some states have long-term care
partnership programs designed to reduce
Medicaid expenditures by eliminating or
reducing incentives of some people to rely
on Medicaid to pay for long-term care
• To encourage people to purchase private
partnership policies, part or all of their
assets are protected from the Medicaid
spend-down requirements
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15-37
Disability-Income Insurance
• The financial impact of total disability on
present savings, assets, and ability to
earn an income can be devastating
• Disability-income insurance provides
income payments when the insured is
unable to work because of sickness or
injury
– Income payments are typically limited to 6070 percent of gross earnings
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15-38
Disability-Income Insurance
(Continued)
• The most common definitions of total
disability are:
– Inability to perform the material and substantial
duties of your regular occupation
– Inability to perform the material and substantial
duties of your occupation, and are not engaged in
any other occupation
– Inability to perform the duties of any occupation
for which you are reasonably fitted by education,
training, and experience
– Inability to perform the duties of any gainful
occupation
– Loss-of-income test, i.e., your income is reduced
as a result of sickness or accident
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15-39
Disability-Income Insurance
(Continued)
• Partial disability means that you can perform
some but not all of the duties of your
occupation
• Some policies offer partial disability benefits
– Usually, partial disability benefits must follow
total disability
– The partial disability benefits are paid at a
reduced rate for a shorter period
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15-40
Disability-Income Insurance
(Continued)
• Residual disabili…
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