Question

Joe is a 25 year-old single worker who receives no coverage for health care from his employer. Joe has a non-fatal medical condition that can be treated at a price of $60 per treatment. Discuss how the out-of-pocket cost that Joe pays for health care will change if he switches jobs to a new employer that offers health care coverage with each of the options below. (12 points, 4 points each)

      A. a $250 per year calendar-year deductible.

      B. a 75/25 participating deductible in which the insurer pays three-quarters of the cost.

     

      C. an HMO that satisfies the traditional federal standards for qualification with a $20 copay

Answer 1

A. A $250 per calendar-year deductible

Under this, the health insurance deductible is $250. So, Joe will be required to pay for his medical costs until the total amounts to $250. After this deductible amount is met, the further medical costs get covered by the health insurance provided by the company. As there is no coinsurance mentioned, it means that 100% medical costs will get covered by the health insurance post the deductible amount is met. The effectiveness of this plan lasts for 1 year, after which it gets reset.

B. a 75/25 participating deductible in which the insurer pays three-quarters of the cost.

In this the deductible has an associated coinsurance. This means that after the deductible has been paid by Joe, then medical costs will get covered as per the 75/25 participating coinsurance. 75% of the medical costs, after deductible has been met, will be covered by the insurer and 25% will be paid by Joe. This plan will last for 1 financial year after which the plan gets renewed.

C. an HMO that satisfies the traditional federal standards for qualification with a $20 copay.

Copay is basically a fixed amount which must be paid by the insured person, if the insured person avails a covered medical service. Copay can have dependency on the deductibles. It can be paid before or after the deductible, depending on what is mentioned in the health plan. Under this plan, Joe will be required to pay a fee of $20 to avail the services of the Health maintenance organization (HMO). The frequency of the fee payment depends on the health plan availed by the user.