Question

Latesha Moore has a choice at work between a traditional health insurance plan that pays 80 percent of the cost of doctor visits after a​ $250 deductible and an HMO that charges a ​$10 ​co-payment per visit plus a ​$20 monthly premium deduction from her paycheck. Latesha anticipates seeing a doctor once a month for her high blood pressure. The cost of each office visit is ​$50. She normally sees the doctor an average of three times a year for other health concerns. Comment on the difference in costs between the two health care plans and the advantages and disadvantages of each.

Answer 1

Answer:

Consider the following calculation and analysis

Explanation:

We will analyse from cost perspective, the alternative with lower cost should be selected.

Total no. of doctor visit = 12 monthly visit + 3 times special visit = 15

Cost = 50 * 15 = $750

Under Traditional health checkup plan

Cost of plan = $ 250 + (20% of doctor visiting charges) = 250 + 20% of 750 = $400

Under HMO

Premium = 20 * 12 months = $240

Co payment = 10 * 15 = 150

Total = $ 390

There is a saving of $10 in HMO, so she should opt for this option. Moreover, the benefit of HMO would be the payments are monthly in small installments ,rather than a big outflow as in the case of traditonal plan.