Sun | May 31, 2020

Oran Hall | Health insurance as a form of financial protection

Published:Sunday | September 22, 2019 | 12:00 AM

Health insurance is a type of insurance that pays a significant portion of the medical and surgical expenses incurred by the insured.

In some cases, the insurance company pays the health service provider directly. In others, the insured pays and is reimbursed by the insurance company.

Many persons access health insurance through group plans sponsored by their employers or groups of which they are members, such as credit unions, but others who do not have access to such plans buy individual health insurance. Coverage is generally extended to the immediate family members of the insured.

Group insurance provides insurance coverage for many people under a single master contract. It insures “classes of persons”, not individuals, so the contract is between the insurer and the organisation purchasing the group contract. Although different employees may enter or leave the group, the names of individual employees do not appear in the contract.

Consider these fundamental principles of employer-sponsored group insurance: Each employee in the group must be actively at work on a full-time basis. The employees cannot determine the amount of their coverage. Employee contributions are made through salary deductions. There must be an employer contribution, and there must be a spread of risk, meaning that there must be both a sufficient amount of lives in the group and a sufficient percentage of the employees who participate in the plan.

Health insurance is beneficial in many ways. It provides funds for unexpected medical expenses, and, since the insurance company pays a meaningful portion of the medical expenses, up to established limits, reduces the need for liquid funds. It also reduces the need to liquidate investments or draw down on savings to meet medical expenses.

By reducing the cost of healthcare to the insured and making healthcare more affordable, it facilitates greater access to healthcare and releases funds for other priorities such as investments and savings.

The Government of Jamaica provides facilities to make healthcare more affordable and accessible. These focus heavily on certain diseases but are particularly valuable to residents in the later stages of life and offer some level of financial protection to Jamaican residents who are not covered by privately sponsored health insurance arrangements.

The National Insurance Scheme (NIS) prides itself on offering what it describes as quality healthcare in the golden years of its contributors, who automatically become eligible for coverage under its NI-Gold Plan, which offers subsidies on a wide range of healthcare services. These include doctor’s office and home visits, in-hospital room and board, prescription drugs, dental care, optical care, surgical operations, hospitalisation, and X-ray and laboratory services.

Members are not required to make contributions or pay premiums. There are participating providers islandwide from whom benefits can be accessed, and members may be required to make a small co-payment when accessing the benefits.

The National Health Fund (NHF) provides subsidies to every person living in Jamaica at any age for the treatment of certain specified chronic illnesses such as arthritis, asthma, diabetes, breast cancer, prostate cancer, glaucoma, hypertension, and epilepsy. Beneficiaries are not required to make contributions or pay premiums, and there are NHF-participating pharmacies islandwide from which benefits may be accessed.

The NHF pays a fixed amount to the participating pharmacy for each drug, and the beneficiary pays the rest. Beneficiaries may use their NHF card and private insurance to cover the cost of the prescription drug covered by the NHF. In such a case, the beneficiary should use the NHF card and then the private health insurance card to cover the rest of the cost.

The Jamaica Drugs for the Elderly Programme, or JADEP, is managed by the NHF and is open to all Jamaican residents 60 years and older who have been diagnosed with one or more of the conditions covered by JADEP. It covers several conditions provided for by the NHF and others like psychotic conditions, benign prostatic hyperplasia, and high cholesterol. There are no premiums or contributions, but beneficiaries are required to pay a fixed dollar amount on each prescription.

The plan covers prescription drugs for the conditions it covers. Beneficiaries of JADEP may also enrol with the NHF, thereby yielding additional benefits. It is necessary to enrol in the various plans, and beneficiaries must present their membership card to be able to access benefits.

These government-sponsored plans are useful in the personal financial planning process as they serve to reduce the cost of healthcare, especially in the later years of life when incomes tend to be lower and healthcare expenses tend to be high.

Another valuable type of insurance is critical illness insurance. It is designed to manage the risk associated with contracting certain dreaded medical conditions such as cancer, stroke, and heart attack. The insurance company pays the sum insured directly to the insured on the first diagnosis of a critical illness stated in the policy provided that the diagnosis is not made within a specified number of days after the issue of the policy. If death occurs after diagnosis but before the benefit is paid, the sum insured is paid to the named beneficiary.

In the absence of health insurance, the expenses associated with treating many medical conditions can potentially wipe out the financial resources of even the well-to-do. Health insurance has a place in every financial plan.

Oran A. Hall, the principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.