The following three options are available on a state health exchange based on th
ID: 2450886 • Letter: T
Question
The following three options are available on a state health exchange based on the recent “Affordable Care Act”.
Option A: Monthly premium of $75. Deductible is $1,500 and the insurance company pays 90% of the balance.
Option B: Monthly premium of $100. Deductible is $500 and the insurance company pays 80% of the balance.
Option C: Monthly premium of $150. No deductible and the insurance company pay 70% of the cost.
Beth has kept a record of her medical expenses for the past few years. Based on her record, the following probability table has been compiled.
Annual Medical Expenses
$1,200
1,000
$1,800
$2,000
$800
$3,000
Probability
0.30
0.08
0.17
0.20
0.15
0.10
Based on prior medical expenses, which is the best option for Beth?
Annual Medical Expenses
$1,200
1,000
$1,800
$2,000
$800
$3,000
Probability
0.30
0.08
0.17
0.20
0.15
0.10
Explanation / Answer
Option B will be the best as it costs the least of them all $1200 annual premiums and $500 deductible.
Expected annual medical expenses = $1566 of which 80% will be paid by the insurance company.
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