Question

Becky’s comprehensive major medical health insurance plan at work has a deductible of $850. The policy pays 80 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 six-day hospital stay, totaled $9,093. 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 $4,000.a.Calculate the total amount Becky would pay under the current policy.b.Would a $4,000 stop-loss provision on her current policy have reduced Becky's cost for this illness?

Answer 1

Answer:

a) $2498.6

b) No

Explanation:

Given that:

Deductible = $850

Medical cost for treatment = $9,093

Policy deductible percentage = 80% = 0.8

a)

Coinsurance =  (Medical cost for treatment - deductible) x (1 - policy deductible percentage)

Substituting values:

Coinsurance = ($9093 - $850) x (1 - 0.8) = $8243 x 0.2 = $1648.6

The total amount Becky would pay under the current policy  = Deductible + Coinsurance = $850  + $1648.6 = $2498.6

b) No, since beck paid $2498.6 instead of a policy of $4000, she saved $1501.4 (i.e $4000 - $2498.6)