Personal Financial Planning Ch 9 Health and Disability Income Insurance

The Tucker family has health insurance coverage that pays 75 percent of out-of-hospital expenses after a $680 deductible per person. If one family member has doctor and prescription medication expenses of $2,500, what amount would the insurance company pay? Insurance payment $

$1,365 ---------------- 2500 - 680 = 1820 1820 x 75% = 1365

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. a. Blue Cross/Blue Shield plan: The monthly premium cost to Ronald will be $59.79. For all doctor office visits, prescriptions, and major medical charges, Ronald will be responsible for 20 percent and the insurance company will cover 80 percent of covered charges. The annual deductible is $840. b. The HMO is provided to employees free of charge. The copayment for doctors' office visits and major medical charges is $25. Prescription copayments are $20. The HMO pays 100 percent after Ronald's copayment. No annual deductible. c. The POS requires that the employee pay $41.97 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. He can also choose to use a health care provider out of the network and pay 20 percent of all charges after he pays a $840 deductible. The POS will pay for 80 percent of those covered visits. No annual deductible. 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 six times during the year at a cost of $140 for each visit. He also spent $82 and $106 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.) Personal annual cost $

$1,383.64 ------------------- 41.97 x 12 = 503.64 annual premiums $840 deductible because Ronald use a out-of-plan office visits. 2 prescriptions x $20 copay = 40 503.64 + 840 + 40 = 1,383.64

The Carter family has health insurance coverage that covers 90% of out-of-hospital expenses once a deductible of $300 (per person) is paid. Chris Carter has medical bills of $2,500. How much will the insurance company pay? $2,000 $1,980 $2,200 $1,870 $2,500

$1,980 ------------------------- 2,500 - 300 = 2,200 x 90% = 1,980

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. a. Blue Cross/Blue Shield plan: The monthly premium cost to Ronald will be $48.48. For all doctor office visits, prescriptions, and major medical charges, Ronald will be responsible for 35 percent and the insurance company will cover 65 percent of covered charges. The annual deductible is $630. b. The HMO is provided to employees free of charge. The copayment for doctors' office visits and major medical charges is $15. Prescription copayments are $10. The HMO pays 100 percent after Ronald's copayment. No annual deductible. c. The POS requires that the employee pay $30.64 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. He can also choose to use a health care provider out of the network and pay 35 percent of all charges after he pays a $630 deductible. The POS will pay for 65 percent of those covered visits. No annual deductible. 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 six times during the year at a cost of $105 for each visit. He also spent $71 and $95 on prescriptions during the year. What total medical costs will Ronald pay if he enrolls in the HMO plan? Personal annual cost $

$110 ---------------------- Under HMO 6 visits x $15 copay = 90 2 prescription x $10 = 20 90 + 20 = 110

The Carter family has health insurance coverage that covers 90% of out-of-hospital expenses once a deductible of $300 (per person) is paid. Chris Carter had a serious illness that required hospitalization, with total medical bills amounting to $55,000. Assume there was a stop-loss provision of $5,000. How much will the Carter family pay? $6,000 $5,770 $5,470 $5,240 $5,000

$5,000 -------------------- Step 1: Subtract the $300 annual deductible from $55,000, which equals $54,700. Step 2: Multiply $54,700 by 10%, which equals $5,470. Step 3: Add the $300 deductible and the $5,470 amount obtained in Step 2, which equals $5,770. Since this amount exceeds the stop-loss provision of $5,000, the Carter family would be responsible for $5,000 (the amount of the stop-loss provision) and the insurance company would pay the remainder.

Georgia, a widow, has take-home pay of $1,550 a week. Her disability insurance coverage replaces 50 percent of her earnings after a four-week waiting period. What amount would she receive in disability benefits if an illness kept Georgia from work for 11 weeks? Disability benefit payment $

$5,425 ------------- 1550 x 50% = 775 775 x 7(11wk-4wk wait period) = 5425

Sandy went to the doctor three times, and each appointment cost $200. Her copayment was $25 per visit. How much was Sandy required to pay in total for her three visits? $25 $75 $175 $200 $525

$75

preferred provider organization (PPO)

A group of doctors and hospitals that agree to provide health care at rates approved by the insurer.

health maintenance organization (HMO)

A health insurance plan that provides a wide range of health care services for a fixed, prepaid monthly premium.

point-of-service (POS) plan

A network of selected contracted, participating providers; also called an HMO-PPO hybrid or open-ended HMO.

stop-loss

A provision under which an insured pays a certain amount, after which the insurance company pays 100 percent of the remaining covered expenses.

copayment

A provision under which the sured pays a flat dollar amount each time a covered medical service is received after the deductible has been met.

A policy that pays you back for actual expenses is called A coinsurance plan. A reimbursement plan. A deductible plan. An indemnity plan. A reasonable and customary plan.

A reimbursement plan.

All of the following are sources of disability income except Worker's compensation. Employer plans. Social Security. Private income insurance programs. All of these are sources of disability income.

All of these are sources of disability income.

deductible

An amount the insured must pay before benefits become payable by the insurance company.

Blue Cross

An independent membership corporation that provides protection against the cost of hospital care.

Blue Shield

An independent membership corporation that provides protection against the cost of surgical and medical care.

Rising health costs are due to all of the following except Costs of prescription drugs. The growing number of uninsured. Advancements in medical technology. Baby boomers using fewer health care services. The overweight population.

Baby boomers using fewer health care services.

Becky's comprehensive major medical health insurance plan at work has a deductible of $700. 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 six-day hospital stay, totaled $9,273. 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 $4,900. a. Calculate the total amount Becky would pay under the current policy. (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. Would a $4,900 stop-loss provision on her current policy have reduced Becky's cost for this illness? No Yes

Becky's co-insurance cost $2145.25 Deductible $700.00 Total personal cost $2843.25 No

Which type of coverage has a low deductible, is all-inclusive, helps to pay hospital and surgical medical bills, and is offered without a separate basic plan? Comprehensive Major Medical Coverage Hospital Indemnity Policy Hospital Expense Insurance Extensive Medical Coverage Surgical Expense Insurance

Comprehensive Major Medical Coverage

The set amount that you must pay toward medical expenses before the insurance company pays benefits is called Reimbursement. Reasonable and customary charges. Deductible. Internal limit. Indemnity.

Deductible.

Blake is an employee for a corporate company and has $500 left in his account at the end of the year. Blake is staying with this company until retirement. Which type of account will let him carry over the $500 in his account to the next calendar year? HBA FSE HTA HVA FSA

FSA For flexible spending accounts (FSAs), current regulations allow a carry over of $500 into the next calendar year and FSAs do not carryover to other employers.

Jenna currently has a job with a corporate company and will not use all of the money in her account before the end of the year. Jenna is staying with this company until she retires. Which type of account will let her carry over $1,000 in the account at the end of the current year to the next year? FSA HVA FTE HRA HBA

HRA For health reimbursement accounts (HRAs), money in the account at the end of the year can carry over to the next year, but you lose the money if you change jobs since your employer funded the account.

Sam currently has a job with a corporate company, but he is switching jobs to work for a local company in Raleigh. Which type of account will let him take his account with him when switching jobs? HRA HSA HTA FSA FSE

HSA For health savings accounts (HSAs), money remaining in the account at the end of the year can carry over to the next year and because you fund the account, you can also take your HSA with you if you change jobs or retire.

All of the following services and treatments are not covered by Medicare, except: Acupuncture Private-duty nursing Vaccinations Hospital Care Routine checkups

Hospital Care

Which type of insurance pays part or all of your hospital bills for room, board, and other charges? Physician's Expense Insurance Hospital Expense Insurance Hospital Indemnity Policy Hospital Patient Policy Hospital Patient Insurance

Hospital Expense Insurance

basic health insurance coverage

Hospital expense insurance, surgical expense insurance, and physician expense insurance.

The type of health insurance coverage that pays for some or all of the daily costs of room and board during a hospital stay is Dental expense. Surgical expense. Hospital expense. Physician expense. Major medical expense.

Hospital expense.

Assume that Medicare Part B pays for 70% of the cost of a trip to your doctor. What is the name of the policy that may pay the remaining 30% of the approved medical costs? Medicare Cost Plans Medishare Insurance Medigap Insurance Mediclaim Insurance Medicare Portion Insurance

Medigap Insurance

Which of the following is NOT a type of health insurance available to individuals or employees? Dental expense insurance Hospital indemnity policy Dread disease policy Minor medical indemnity insurance Vision care insurance

Minor medical indemnity insurance

Which Medicare part provides the Medicare Advantage program? Part A Part B Part C Part D None of these

Part C

What is the primary purpose of medical expense insurance? Protect against death expenses. Provide payments to make up for some income of a person who cannot work as a result of injury or illness. Pay actual medical costs for illness or injury. Pay a salary if an employee is disabled. Repay loans if an employee cannot work because of illness or injury.

Pay actual medical costs for illness or injury.

hospital expense insurance

Pays part or all of hospital bills for rooms, board, and other charges.

surgical expense insurance

Pays part or all of the surgeon's fees for an operation.

Which of the following is usually combined with hospital and surgical insurance and referred to as Basic Health Insurance Coverage? Major Medical Expense Hospital Indemnity Policy Health Patient Insurance Deductible Coverage Insurance Physician's Expense Insurance

Physician's Expense Insurance

manage care

Prepaid health plans that provide comprehensive health care to members.

physician expense insurance

Provides benefits for doctors' fees for nonsurgical care, X-rays, and lab tests

long-term care insurance (LTC)

Provides day-in, day-out care for long-term illness or disability.

disability income insurance

Provides payments to replace income when an insured person is unable to work.

A health insurance policy pays 75 percent of physical therapy costs after a $520 deductible. In contrast, an HMO charges $31 per visit for physical therapy. How much would a person save with the HMO if he or she had 12 physical therapy sessions costing $130 each? Savings with HMO $408

Savings with HMO $408

Blue Cross and Blue Shield are Health maintenance organizations (HMO). Private insurance companies. Statewide organizations. Types of Medicare. Preferred provider organizations (PPO).

Statewide organizations.

Medigap (MedSup) insurance

Supplements Medicare by filling the gap between Medicare payments and medical costs not covered by Medicare.

The coinsurance clause, when related to health insurance, is a provision in which: The insured only covers the costs of medical treatment. The insurer only covers the costs of medical treatment. The insured covers only up to 40% of the costs of medical treatment. The insurer covers only up to 40% of the costs of medical treatment. $5,000

The insurer covers only up to 40% of the costs of medical treatment. ------------------- The coinsurance clause, when related to health insurance, is a provision in which both the insured and insurer share the covered costs of medical treatment.

Most people receive health insurance under a group plan from Individual plans. Their bank or lending institution. Their employer. COBRA. All of the above.

Their employer.

coinsurance

a provision under which both the insured and the insurer share the covered losses.

Stephanie was injured in a car accident and was rushed to the emergency room. She received stitches for a facial wound and treatment for a broken finger. Under Stephanie's PPO plan, emergency room care at a network hospital is 70 percent covered after the member has met a $340 annual deductible. Assume that Stephanie went to a hospital within her PPO network. Her total emergency room bill was $1,040. a. What amount did Stephanie have to pay? Personal cost $ b. What amount did the PPO cover? PPO cost $

a. $550 b. $490 --------------------- a. 1040 - 340 = 700 700 x 30% = 210; therefore Stephanie pays $340 (deductible) + 210 = $550 b. Insurance pay 70% x 700 = $490