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Study Guide in HRDM ELEC101: PERSONAL FINANCE Module No._9_

Module 9: Financing Health and Care Liability

MODULE OVERVIEW

A commonly overlooked element of financial planning is disability income insurance.

Many financial experts point out that people between the ages of 40 and 65 have a greater
change of missing at least three months of work due to an accident or illness than they do
of dying. This chapter will provide guidelines for determining the appropriate coverage for
disability income insurance for your life situation.

MODULE LEARNING OBJECTIVES

At the end of this module, you should be able to:

 Evaluate the differences among health care plans
 Evaluate the differences among health care plans offered by private companies and
by the government
 Appreciate how Philhealth works and understand the use of private health card
insurance
 Know the disability benefits offered by SSS

LEARNING CONTENTS (title of the subsection)

Topic 1: Disability and Health Insurance

A. What is health insurance?

Health insurance, refers to medical expense insurance, is a form of protection that eases
the financial burden people may experience as a result of illness or injury. You pay a
premium or fee to the insurer. In return the company paus most of your medical costs.

Health insurance includes both medical expense insurance and disability income insurance.

 Medical expense insurances – pays only the actual medical costs.

 Disability income insurance – provides payments to make up for some of the income
of a person who cannot work as a result of injury or illness.

Health insurance plans can be purchased in several different ways: group health insurance
and individual insurance.

 Group health insurance – this plan is employer sponsored. This means that the
employer offers the plans and usually pays some of their employees.
 Individual health insurance – some people do not have access to an employer-
sponsored group insurance plan because they are self-employed. Individual plans
can be adapted to meet you own needs.

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Sub-topic 1: Health Insurance Coverage

Types of Health Insurance Coverage

1. BASIC HEALTH INSURANCE COVERAGE Basic health insurance coverage

includes hospital expense coverage, surgical expense coverage, and physician
expense coverage.

 Hospital Expense. Hospital expense coverage pays for some or all of the daily costs
of room and board during a hospital stay. Routine nursing care, minor medical
supplies, and the use of other hospital facilities are covered as well. For example,
covered expenses would include anesthesia, laboratory fees, dressings, X-rays,
local ambulance service, and the use of an operating room.
 Surgical Expense. Surgical expense insurance pays all or part of the surgeon’s fees
for an operation, whether it is done in a hospital or in the doctor’s office. Policies
often have a list of the services that they cover, which specifies the maximum
payment for each type of operation. For example, a policy might allow $500 for an
appendectomy. If the entire surgeon’s bill is not covered, the policyholder has to pay
the difference.
 Physician Expense. Physician expense insurance meets some or all the costs of
physician care that do not involve surgery. This form of health insurance covers
treatment in a hospital, a doctor’s office, or even a patient’s home. Plans may cover
routine doctor visits, X-rays, and lab tests. Like surgical expense, physician expense
specifies maximum benefits for each service. Physician expense coverage is usually
combined with surgical and hospital coverage in a package called basic health
insurance.
 Major Medical Expense Insurance Coverage Most people find that basic health
insurance meets their usual needs. The cost of a serious illness or accident,
however, can quickly go beyond the amounts that basic health insurance will pay.
Chen had emergency surgery, which meant an operation, a two-week hospital stay,
a number of lab tests, and several follow-up visits. He was shocked to discover that
his basic health insurance paid less than half of the total bill, leaving him with debts
of more than $10,000.

2. HOSPITAL INDEMNITY POLICIES A hospital indemnity policy pays benefits when

you’re hospitalized. Unlike most of the other plans mentioned, however, these
policies don’t directly cover medical costs. Instead you are paid in cash, which you
can spend on medical or nonmedical expenses as you choose. Hospital indemnity
policies are used as a supplement to—and not a replacement for—basic health or
major medical policies. The average person who buys such a policy, however,
usually pays much more in premiums than he or she receives in payments.
3. DENTAL EXPENSE INSURANCE Dental expense insurance provides
reimbursement for the expenses of dental services and supplies. It encourages
preventive dental care. The coverage normally provides for oral examinations
(including X-rays and cleanings), fillings, extractions, oral surgery, dentures, and
braces. As with other insurance plans, dental insurance may have a deductible and
a coinsurance provision, stating that the policyholder pays from 20 to 50 percent
after the deductible.
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4. VISION CARE INSURANCE An increasing number of insurance companies are

including vision care insurance as part of group plans. Vision care insurance may
cover eye examinations, glasses, contact lenses, eye surgery, and the treatment of
eye diseases.
5. PSYCHOLOGY OF DREAD DISEASE POLICIES Dread disease, trip accident,
death insurance, and cancer policies are usually sold through the mail, in
newspapers and magazines, or by door-to-door salespeople. These kinds of policies
play upon unrealistic fears, and they are illegal in many states. They cover only
specific conditions, which are already fully covered if you are insured under a
major medical plan.
6. LONG-TERM CARE INSURANCE Long-term care insurance (LTC) provides
coverage for the expense of daily help that you may need if you become seriously ill
or disabled and are unable to care for yourself. It is useful whether you require a
lengthy stay in a nursing home or just need help at home with daily activities such as
dressing, bathing, and household chores. Annual premiums range from less than
$1,000 to over $16,000, depending on your age and extent of the coverage. The
older you are when you enroll, the higher your annual premium.

Sub-topic 2: Major Provisions in a Health Insurance Policy

All health insurance policies have certain provisions in common. You have to be sure that
you understand what your policy covers. What are the benefits? What are the limits? The
following are details of provisions that are usually found in health insurance policies:

 Eligibility: The people covered by the policy must meet specified eligibility
requirements, such as family relationship and, for children, a certain age.
 Assigned benefits: You are reimbursed for payments when you turn in your bills and
claim forms. When you assign benefits, you let your insurer make direct payments to
your doctor or hospital.
 Internal limits: A policy with internal limits sets specific levels of repayment for certain
services. Even if your hospital room costs $600 a day, you won’t be able to get more
than $250 if an internal limit specifies that maximum.
 Copayment: A copayment is a flat fee that you pay every time you receive a covered
service. The fee is usually between $20 and $30, and the insurer pays the balance
of the cost of the service. This is different from coinsurance, which is the percentage
of your medical costs for which you are responsible after paying your deductible.
 Service benefits: Policies with this provision list coverage in terms of services, not
dollar amounts: You’re entitled to X-rays, for instance, not $40 worth of X-rays per
visit. Service benefits provisions are always preferable to dollar amount coverage
because the insurer will pay all the costs.
 Benefit limits: This provision defines a maximum benefit, either in terms of a dollar
amount or in terms of number of days spent in the hospital.
 Exclusions and limitations: This provision specifies services that the policy does not
cover. It may include preexisting conditions (a condition you were diagnosed with
before your insurance plan took effect), cosmetic surgery, or more.
 Guaranteed renewable: This provision means that the insurer can’t cancel the policy
unless you fail to pay the premiums. It also forbids insurers to raise premiums unless
they raise all premiums for all members of your group.

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 Cancellation and termination: This provision explains the circumstances under which
the insurer can cancel your coverage. It also explains how you can convert your
group contract into an individual contract.

Sub-topic 3: Private Health Care Plans and Government Health Care Programs

Private Health Care Plans

 PRIVATE INSURANCE COMPANIES Several hundred private insurance companies

are in the health insurance business. They provide mostly group health plans to
employers, which in turn offer them to their employees as a benefit. Premiums may
be fully or partially paid by the employer, with the employee paying any remainder.
These policies typically pay you for medical costs you incur, or they send the
payment directly to the doctor, hospital, or lab that provides the services.
 HOSPITAL AND MEDICAL SERVICE PLANS Blue Cross and Blue Shield are
statewide organizations similar to private health insurance companies. Each state
has its own Blue Cross and Blue Shield. The “Blues” provide health insurance to
millions of Americans. Blue Cross provides hospital care benefits. Blue Shield
provides benefits for surgical and medical services performed by physicians.
 HEALTH MAINTENANCE ORGANIZATIONS Rising health care costs have led to an
increase in managed care plans.

Managed care refers to prepaid health plans that provide comprehensive

health care to their members. Managed care is designed to control the cost of health
care services by controlling how they are used.
Health maintenance organization (HMO) is a health insurance plan that
directly employs or contracts with selected physicians and other medical
professionals to provide health care services in exchange for a fixed, prepaid
monthly premium.

 PREFERRED PROVIDER ORGANIZATIONS A variation on the HMO is a preferred

provider organization (PPO), a group of doctors and hospitals that agree to provide
specified medical services to members at prearranged fees. PPOs offer these
discounted services to employers either directly or indirectly through an insurance
company. The premiums for PPOs are slightly higher than the premiums for HMOs.
 HOME HEALTH CARE AGENCIES Rising hospital costs, new medical technology,
and the increasing number of elderly people have helped make home care one of
the fastest-growing areas of the health care industry. Home health care consists of
home health agencies; home care aide organizations; and hospices, facilities that
care for the terminally ill. These providers offer medical care in a home setting in
agreement with a medical order, often at a fraction of the cost hospitals would
charge for a similar service.
 EMPLOYER SELF-FUNDED HEALTH PLANS Some companies choose to self-
insure. The company runs its own insurance plan, collecting premiums from
employees and paying medical benefits as needed. However, these companies must
cover any costs that exceed the income from premiums. Unfortunately, not all
corporations have the financial assets necessary to cover these situations, which
can mean a financial disaster for the company and its employees.

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 NEW HEALTH CARE ACCOUNTS Health savings accounts (HSAs), which

Congress authorized in 2003, are the newest addition to the alphabet soup of health
insurance available to American workers. Now you and your employer must sort
through HSAs, health reimbursement accounts (HRAs), and flexible spending
accounts (FSAs). Each has its own rules about how money is spent, how it can be
spent, and how it is taxed.

Government Health Care Programs

 MEDICARE Perhaps the best-known government health program is Medicare.

Medicare is a federally funded health insurance program available mainly to people
over 65 and to people with disabilities. Medicare has four parts: hospital insurance
(Part A), medical insurance (Part B), Medicare Advantage Plan (Part C), and
Prescription Drug Coverage (Part D).
 MEDICAID The other well-known government health program is Medicaid, a medical
assistance program offered to certain low-income individuals and families. Medicaid
is administered by states, but it is financed by a combination of state and federal
funds. Unlike Medicare, Medicaid coverage is so comprehensive that people with
Medicaid do not need supplemental insurance. Typical Medicaid benefits include
physicians’ services, inpatient and outpatient hospital services, lab services, skilled
nursing and home health services, prescription drugs, eyeglasses, and preventive
care for people under the age of 21.

B. Disability Income Insurance

Disability income insurance was set up to protect against such loss of income. This
kind of coverage is very common today, and several hundred insurance companies offer it.

Disability income insurance provides regular cash income when you’re unable to
work because of a pregnancy, a non-work-related accident, or an illness. It protects your
earning power, your most valuable resource.

Sub-topic 4: Sources of Disability Income

 WORKER’S COMPENSATION If your disability is a result of an accident or illness

that occurred on the job, you may be eligible to receive worker’s compensation
benefits in your state. Benefits will depend on your salary and your work history.
 EMPLOYER PLANS Many employers provide disability income insurance through
group insurance plans. In most cases your employer will pay part or all of the cost of
such insurance. Some policies may provide continued wages for several months
only, whereas others will give you long-term protection.
 SOCIAL SECURITY Social Security may be best known as a source of retirement
income, but it also provides disability benefits. If you’re a worker who pays into the
Social Security system, you’re eligible for Social Security funds if you become
disabled. How much you get depends on your salary and the number of years you’ve
been paying into Social Security. Your dependents also qualify for certain benefits.
However, Social Security has very strict rules.
 PRIVATE INCOME INSURANCE PROGRAMS Privately owned insurance
companies offer many policies to protect people from loss of income resulting from

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illness or disability. Disability income insurance gives weekly or monthly cash

payments to people who cannot work because of illness or accident. The amount
paid is usually 40 to 60 percent of a person’s normal income. Some plans, however,
pay as much as 75 percent.

For more information on this, read Kapoor (2016) pages 284-319.

LEARNING ACTIVITY 1

Reflection on Learning:
 What is health insurance?
 What are the three ways of purchasing health insurance?
 What are the three types if coverage that are included in the basic health insurance?

Learning Activity:
 During face-to-face discussion, prepare for a recitation.
 Prepare for a quiz after discussion.
 Research on the different health insurance in the Philippines.
 Deadline of submission is on December 11, 2020.

LEARNING CONTENTS (title of the subsection)

Topic 2: Philhealth

PHILHEALTH BENEFITS (RA 7875, as amended by RA 9241)

A. The National Health Insurance Program The National Health Insurance Program
(NHIP), formerly known as Medicare, is a health insurance program for SSS
members and their dependents whereby the healthy subsidize the sick who may find
themselves in need of financial assistance when they get hospitalized.

The Philippine Health Insurance Corporation (PHIC) or PhilHealth is the mandated

administrator of the Medicare program (now known as NHIP) under the National
Health Insurance Act of 2013 (Republic Act 7875 as amended by RA 9241 and
10606)

B. Coverage The program covers the following:

1. Members In The Formal Economy - includes those with formal contracts and fixed
terms of employment including workers in the government and private sector, whose
premium contribution payments are equally shared by the employee and the
employer.
2. Sponsored Members - includes members whose contributions are being paid for
by another individual, government agencies, or private entities.
3. Members In The Informal Economy - includes a wide range of individuals and
sectors ranging from the self-earning to migrant workers.
4 Lifetime Members - members who have reached the age of retirement under the
law and have paid at least 120 monthly premium contributions.
5. Indigent Members - persons who have no visible means of income, or whose
income is insufficient for family subsistence, as identified by the Department of
Social Welfare and Development (DSWD), based on specific criteria.

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6. Senior Citizens - those who are 60 years old and above and are not currently
covered by any of the existing membership categories of PhilHealth.

C. The Benefits

A unified benefit package for all PhilHealth members is being implemented which
includes the following categories of personal health services:

1. Inpatient hospital care:

 Room and board;

 Services of health care professionals;
 Diagnostic, laboratory, and other medical examination services;
 Use of surgical or medical equipment and facilities;
 Prescription drugs and biologicals, subject to the limitations stated in Section 37 of
RA 7875;
 Inpatient education packages.

2. Outpatient care:

 Services of health care professionals;

 Diagnostic, laboratory, and other medical examination services;
 Personal preventive services;
 Prescription drugs and biologicals, subject to the limitations described in Section 37
of RA 7875; and
 Emergency and transfer services.

For further reading, refer to Philhealth on DOLE’s Handbook pages 53-54.

https://www.philhealth.gov.ph/about_us/mandate.html#gsc.tab=0,
LEARNING ACTIVITY 2

Reflection on Learning:
 What is Philhealth?
 What is the coverage of Philhealth?

Learning Activity:
 During face-to-face discussion, prepare for a recitation.
 Prepare for a quiz after discussion.
 Research on the differences of private and government health insurance.
 Deadline of submission is on December 11, 2020.

LEARNING CONTENTS (title of the subsection)

Topic 3: Social Security System

SOCIAL SECURITY BENEFITS (RA 1161, as amended by RA 8282)

A. The Social Security Program

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The Social Security Program provides a package of benefits in the event of

death, disability, sickness, maternity, and old age. Basically, the Social Security
System (SSS) provides for a replacement of income lost on account of the
aforementioned contingencies.
B. Coverage A private employee, whether permanent, temporary or provisional.
C. The Benefits

C.1 Sickness

The sickness benefit is a daily cash allowance paid for the number of days a
member is unable to work due to sickness or injury.

A member is qualified to avail himself/herself of this benefit if:

1. he/she is unable to work due to sickness or injury and is thus confined either in
the hospital or at home for at least four days;
2. he/she has paid at least three monthly contributions within the 12 - month period
immediately before the semester of sickness;
3. he/she has used up all current company sick leaves with pay for the current year;
and
4. he/she has notified his/her employer.

The amount of an employee’s sickness benefit is computed as: the daily sickness
allowance times the approved number of days. Effective May 24, 1997, the daily sickness
allowance is 90 percent of the average daily salary credit (Section 14 of Republic Act
8282).

C.2. Maternity (see Title #8. Maternity Leave on page 27)

C.3. Disability

It is a cash benefit paid to a member who becomes permanently disabled, either

partially or totally.

A member who suffers partial or total permanent disability, with at least one (1)
contribution paid to the SSS prior to the semester of contingency, is qualified.

The complete and permanent loss of use of any of the following parts of the body
under permanent partial disability:

one thumb sight of one eye one big toe

one index finger hearing of one ear one hand
one middle finger hearing of both ears one arm
one ring finger one foot one ear
one little finger one leg both ears

The following fall under permanent total disability:

1. Complete loss of sight of both eyes;
2. Loss of two limbs at or above the ankle or wrists;
3. Permanent complete paralysis of two limbs;
4. Brain injury causing insanity; and

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5. Other cases as determined and approved by the SSS.

Types of disability benefits:

1. The monthly pension which is paid to a disabled member who has paid at least 36
monthly contributions to the SSS; and
2. The lump sum amount which is granted to those who have not paid the required
36 monthly contributions.

C.4. Retirement

The types of retirement benefits are:

a. the monthly pension, and
b. the lump sum amount.

The monthly pension is a lifetime cash benefit paid to a retiree who has paid at least
120 monthly contributions to the SSS prior to the semester of retirement.

The lump sum amount is granted to a retiree who has not paid the required 120
monthly contributions.

C.5. Death & Funeral

The death benefit is a cash paid to the beneficiaries of a deceased member.

The primary beneficiaries are the legitimate dependent spouse until he or she
remarries and legitimate, legitimated, legally adopted or illegitimate dependent children of
the member. In the absence of primary beneficiaries, the secondary beneficiaries are the
dependent parents of the member. In their absence, the person designated by the member
as beneficiary in his/her member’s record will be the recipient.

The types of death benefits are:

1. the monthly pension; and
2. the lump sum amount.

The monthly pension is granted only to the primary beneficiaries of a deceased

member who had paid 36 monthly contributions before the semester of death.

The lump sum is the amount granted to the primary beneficiaries of a deceased
member who had paid less than 36 monthly contributions before the semester of death.

To supplement your reading, refer to SSS (Disability) on DOLE’s Handbook page 88/
https://www.sss.gov.ph/sss/appmanager/pages.jsp?page=disabilitypension,
LEARNING ACTIVITY 3

Reflection on Learning:
 What is the coverage of Social Security System?
 How can you avail of such benefit?

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Learning Activity:
 During face-to-face discussion, prepare for a recitation.
 Prepare for a quiz after discussion.

SUMMARY

 Health insurance is a form of protection that eases the financial burden people may
experience as a result of illness or injury.
 There are many health care insurance coverage and health care plans.
 The Social Security and Philhealth are government organization that provides health
and disability benefits.
REFERENCES

Philhealth (n.d.) Agency’s Mandate and Functions. Retrieved from:

https://www.philhealth.gov.ph/about_us/mandate.html#gsc.tab=0

Kapoor, Jack R. et. al (2016). Focus on Personal Finance: An Active Approach to Help you
Achieve Financial Literacy. Fifth Edition. McGrawHill Education. Chapter 9, pages 284-319.

SSS (n.d). Disability Benefit. Retrieved July 3, 2020 from:

https://www.sss.gov.ph/sss/appmanager/pages.jsp?page=disabilitypension

Handbook: Worker’s Statutory Monetary Benefits Retrieved from:

http://bwc.dole.gov.ph/images/Handbook/2020Handbook_20Feb20.pdf

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