Question

Bonnie and Clyde are married and have purchased a comprehensive major medical policy which covers them and their two sons, Smith and Wesson. The policy has a $500 calendar year family deductible, a $2,500 stop-loss provision, and an 80% co-insurance clause. The following losses occur: On January 1, 2013 Bonnie was treated for an infection at a cost of $200, on July 1, 2013 Smith was treated for an injury suffered while waterskiing at a cost of $10,000, on December 5, 2013 Clyde underwent eye surgery at a cost of $1,500, and on January 5, 2014 Wesson was treated for a broken leg at a cost of $2,000.

How much will the insurer pay for each of these losses?

Answer 1

Family pays deductible amount for the bill dated January 1, 2013 =$200 (For this loss insurer pays nothing.)

Next, for the bill dated July 1, 2013, family pays the deductible amount = $300 ($500 - $200)

So the remaining bill amount for the distribution between insured and insurer =$10,000 - $300 = $9700

As there is co insurance rate is 80%, family's share of the bill = 20% of $9,700 = $1,940

So insurer has to pay the amount for the bill dated July 1, 2013 = $9,700 - $1,940 = $7,760 (or 80% of $9,700)

Again for the bill dated December 5, 2013 family's share = 20% of $1,500 = $300

Insurer pays for the bill dated December 5, 2013 = 80% of $1500 = $1,200

Further for the bill dated January 5, 2014 family has to pay the deductible = $500

Remaining bill to share between insured and insurer (of the date January 5, 2014) = $1,500

insurer pays for this bill = 80% of $1,500 = $1,200

Thus, insurer pays = $0 + $7,760 + $1,200 + $1,200 (for each bill respectively) = $10,160

Note: Family's liability = deductible for each calender year + 20% of the bill but upto the stop loss amount of $2,500