Finance 1000 chapter 9

The Tucker family has health insurance coverage that pays 70 percent of out-of-hospital expenses after a deductible of $760 per person. If one family member has doctor and prescription medication expenses of $2,900, what amount would the insurance company pay?

(Expenses - deductible/person)*%coverage (2,900-760)*.7 =1489

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. There is 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 four times during the year at a cost of $205 for each visit. He also spent $81 and $105 on two prescriptions during the year. What total costs will Ronald pay if he enrolls in the HMO plan?

-The doctor's office visit and medical charges = Copayment of $ 15 each time, and 4 visits = 4x15 =$60 -Prescriptions charges = Copayment of $10 each time, two visits made = 2x10 = $20 Total annual costing = 60+20 = $80

Georgia, a widow, has take-home pay of $1,800 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 17 weeks?

1. 17 weeks - 4 weeks = 13 weeks 2. 13 weeks * .5 weekly pay 2. 13*900=$11,700

Becky's comprehensive major medical health insurance plan at work has a deductible of $820. 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 nine-day hospital stay, totaled $9,033. 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 $3,700. b.Would a $3,700 stop-loss provision on her current policy have reduced Becky's cost for this illness?

1. co-pay: (Total hospital bill - deductible) x (1-policy deductible percentage) 1. (9,033-820) x (1-.8) = 8213 x 0.2 = 1642.6 2. deductible = 820 3. deductible + co-pay = 2462.60 4. no, she paid $2462.6 instead of a policy of $3700, she saved $1237.40

Using the "nonworking" spouse method, what should be the life insurance needs for a family whose youngest child is 9 years old?

1. insurance needed = (18 - age of youngest child) x $10,000 =$90,000

#12******You and your spouse are in good health and have reasonably secure careers. Each of you makes about $43,000 annually. You own a home with a mortgage of $86,000, and you owe $18,000 on car loans, $8,000 in personal debts, and $7,000 on credit card loans. You have no other debts. You have no plans to increase the size of your family in the near future. Assume funeral expenses of $7,000. Estimate your total insurance needs using the DINK method.

1. insurance needed = (One half of mortgage) + (One half of car loan) + (One half of personal debts) + (One half of credit card loans) + funeral expenses = 43,000 + 9,000 + 4,000 + 3,500 + 7,000 = $66500

The monthly premium cost to Ronald for the Blue Cross/Blue Shield plan 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. 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 two prescriptions during the year. What annual medical costs will Ronald pay using the sample medical expenses provided if he enrolls in the Blue Cross/Blue Shield plan?

= (Monthly premium × 12) + Deductible + (Coinsurance percent × Coinsurance expenses) =(48.48x12)+630+(.35x166) =1269.86

19. Your variable annuity charges administrative fees at an annual rate of 0.17 percent of account value. Your average account value during the year is $218,000. What is the administrative fee for the year?

=(principle amount) *( % rate in # vale) =218,000*.0017 =$370.6

2% for 10 yrs = 1.219 In 2007, Joelle spent $5,300 on her health care. If this amount increased by 2 percent per year, what would be the amount Joelle spent in 2017 for the same health care?

=principle amount x (%*years calculation) =5300 x 1.219 = 6460.70

3% for 10 years = 1.344 In 2012, per capita spending on health care in the United States was about $9,500. If this amount increased by 3 percent a year, what would be the amount of per capita spending for health care in 10 years?

=principle amount x (%*years calculation) =9500 x 1.344 =12768.00

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 an annual deductible of $490. Assume that Stephanie went to a hospital within her PPO network. Her total emergency room bill was $1,440. a. What amount did Stephanie have to pay? Personal cost $ b. What amount did the PPO cover? PPO cost $

a. deductible+(bill - deductible)*(1-percentage of coverage) 490+(1440-490)*.3=$775

#8******The POS requires that the employee pay $25.46 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 with no annual deductible. He can also choose to use a health care provider out of the network and pay 25 percent of all charges after he pays a $550 deductible. The POS will pay for 75 percent of those covered visits. 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 five times during the year at a cost of $110 for each visit. He also spent $66 and $90 on two prescriptions during the year. Assume Ron visited a physician outside of the network plan but had his prescriptions filled at a network-approved pharmacy. *HMO plan is $5 per prescription If Ronald selects the POS plan, what will his annual medical costs be?

1. personal annual cost =(Monthly premium × 12) + Deductible + {[(Number of office visits × Cost per visit) - Deductible] × 0.25} + (Number of prescriptions × $5) = ( $25.46 x 12) + $550 + (((5 x $110) - $550) x .25) + (2 x $5) =$ 865.52

#2***A health insurance policy pays 70 percent of physical therapy costs after a deductible of $320. In contrast, an HMO charges $21 per visit for physical therapy. How much would a person save with the HMO if he or she had 12 physical therapy sessions costing $80 each?

1. personal costs =Deductible + {[(Number of visits × Cost per visit) − Deductible] × (1 − 0.70)} = $320 + (((12 x $80) - $320) x .3) =540.8 2. HMO personal costs =Number of visits × Fee per visit =$21 x 12 = $252 3. savings with HMO = 540.8-252 =$288.8

20. Sophia purchased a variable annuity contract with a purchase payment of $105,000. Surrender charges begin with 6 percent in the first year and decline by 2 percent each year. In addition, Sophia can withdraw 9 percent of her contract value each year without paying surrender charges. In the first year, Sophia needed to withdraw $16,150. Assume that the contract value had not increased or decreased because of investment performance. What was the surrender charge Sophia had to pay?

1. surrender charge = [Withdrawal amount - (Free withdrawal percent × Account value)] × Surrender charge = ((16,150 - (0.09 x $105,000) x 0.06 = $402