Ronald Roth started his new job as controller with Aerosystems today. Carole, th
ID: 1172367 • Letter: R
Question
Ronald Roth started his new job as controller with Aerosystems today. Carole, the employee benefits clerk, gave Ronald a packet that contains information on the company’s health insurance options. Aerosystems offers its employees the choice between a private insurance company plan (Blue Cross/Blue Shield), an HMO, and a PPO. Ronald needs to review the packet and make a decision on which health care program fits his needs. The following is an overview of that information.
Blue Cross/Blue Shield plan: The monthly premium cost to Ronald will be $61.83. For all doctor office visits, prescriptions, and major medical charges, Ronald will be responsible for 25 percent and the insurance company will cover 75 percent of covered charges. The annual deductible is $850.
The HMO is provided to employees free of charge. The copayment for doctors’ office visits and major medical charges is $10. Prescription copayments are $5. The HMO pays 100 percent after Ronald’s copayment. No annual deductible.
The POS requires that the employee pay $44.04 per month to supplement the cost of the program with the company’s payment. If Ron uses health care providers within the plan, he pays the copayments as described above for the HMO with no annual deductible. He can also choose to use a health care provider out of the network and pay 25 percent of all charges after he pays a $850 deductible. The POS will pay for 75 percent of those covered visits.
Ronald decided to review his medical bills from the previous year to see what costs he had incurred and to help him evaluate his choices. He visited his general physician five times during the year at a cost of $170 for each visit. He also spent $84 and $108 on prescriptions during the year. Assume Ron visited a physician outside of the network plan but had his prescriptions filled at a network-approved pharmacy.
If Ronald selects the POS plan, what would his annual medical costs be? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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Ronald Roth started his new job as controller with Aerosystems today. Carole, the employee benefits clerk, gave Ronald a packet that contains information on the company’s health insurance options. Aerosystems offers its employees the choice between a private insurance company plan (Blue Cross/Blue Shield), an HMO, and a PPO. Ronald needs to review the packet and make a decision on which health care program fits his needs. The following is an overview of that information.
Explanation / Answer
$44.04 per month is $528.48 annually. If Ronald choose the HMO route he would pay $528.48 plus $60(= 5*$10 + 2*$5), which gives a grand total of $588.48. However, if Ronald went with the second insurance option he would simple need to reduce the premium of $61.83 down to $44.04. That is the only difference in that plan, but the total for the year would bring him to $61.83 - $44.04 = $17.79 *12= $213.48. $213.48 is the difference that Ronald would see due to the decreased premium. All he needs to do is subtract this number from the original amount in the health insurance plan in part a.
For Part a,
5 visits at $170 per visit; 2 each prescription at $84 and $108 respectively.
His monthly premium would be constant at $61.83 as well as his $850 deductible.
5 visits are $850 and the prescriptions would bring that total to…$1,042. He would be responsible for 25% of this total, which is $260.50. His monthly premium and deductible would bring his total amount spent for the year at $1,852.46.
This would bring us to $1,852.46 - $213.48 = $1,638.98. This is the amount he would pay if he chooses this plan.
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