Question

Ronald Roth started his new job as Controller with Aerosystems today. Carol, 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) The monthly premium cost to Ronald for the Blue Cross/Blue Shield plan will be $42.32. 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 $500. B) The HMO is provided to employees free of charge. The co-payment for doctors’ office visits and major medical charges is $10. Prescription co-payments are $5. The HMO pays 100 percent after Ronald’s co-payment. There is no annual deductible. C) The POS requires that the employee pay $24.44 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 co-payments as described above for the HMO. He can also choose to use a health care provider out of the service and pay 20 percent of all charges after he pays a $500 deductible. The POS will pay for 80 percent of those covered visits. 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 $125 for each visit. He also spent $65 and $89 on prescriptions during the year. Using these costs as an example, what would Ron pay for each of the plans described above? (For the purposes of the POS computation, assume that Ron visited a physician outside of the network plan. Assume he had his prescriptions filled at a network-approved pharmacy.) -Evaluating Health insurance Options: What total costs will Ronald pay if he enrolls in the HMO plan?

Answer 1

Particulars	Previous Year	Blue Cross/ Blue Shield	HMO		PPO
			Inside Network	Outside Network	Inside Network	Outside Network
Annualised Premium	0	$507.84	$0.00	$0.00	$293.28	$293.28
		($42.32*12 month)			($24.44*12 month)	($24.44*12 month)
Fixed Fee deductible for Outside Network						$500.00
Doctor Visits And Major Medical Charges	$500.00	$100.00	$40.00	$500.00	$40.00	$100.00
	(4 times *$125 per visit)	(20% Payout By Insured)	(4 times *$10 Co-pay per visit)	(4 times *$125 per visit)	(4 times *$10 Co-pay per visit)	(20% Payout By Insured)
Prescribtions	$154.00	$30.80	$10.00	$10.00	$10.00	$30.80
	($65+$89)	($154*20% Payout by Insured)	($5 co-payment*2)	($5 co-payment *2)*	($5 co-payment*2)	($154*20% Payout by Insured)
Annual Deductible	0	$500.00	$0.00	$0.00	$0.00	$0.00
Total	$654.00	$1,138.64	$50.00	$510.00	$343.28	$924.08

* Assuming HMO Plan Offers Prescription Drug Coverage

If Ron Goes for an HMO Plan he will have to pay $510 for physicians outside the network plan which is least in all the cases therefore he should prefer HMO plan .

If Ron prefer to have his care coordinated through a single doctor, an HMO plan might be right for him.