Becky’s comprehensive major medical health insurance plan at work has a deductib

Question

Becky’s comprehensive major medical health insurance plan at work has a deductible of $470. The policy pays 75 percent of any amount above the deductible. While on a hiking trip, Becky contracted a rare bacterial disease. Her medical costs for treatment, including medicines, tests, and a five-day hospital stay, totaled $9,153. A friend told her that she would have paid less if she had a policy with a stop-loss feature that capped her out-of-pocket expenses at $4,300. a. Calculate the total amount Becky would pay under the current policy. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Becky's co-insurance cost $ Deductible $ Total personal cost $ b. Would a $4,300 stop-loss provision on her current policy have reduced Becky's cost for this illness? No Yes

Explanation / Answer

The current policy is

= 9153 - 470 = 8683 * (1 - 0.75) = 2170.75

(1- 0.75) is the amount Becky must pay

Hence the total policy amount = 2170.75 + 470 = 2640.75

0.75 * (9153 - 470) = $6512.25 insurance pays
9153 - 6512.25 = $2640.75 becky pays

co-insurance and deductible together cost $2640.75, deductible is $470, hence co-insurance alone is 2640.75 - 470 = $2170.75.

b) Answer is NO

4300 stop-loss provision would not reduce Becky's cost of illness.

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