Question

Assignment below:

Zach Carey was a self-employed window washer earning approximately $700 per week. One day, while cleaning windows on the eighth floor of the Second National Bank Building, he tripped and fell from the scaffolding to the pavement below. He sustained severe multiple injuries but miraculously survived the accident. He was immediately rushed to the local hospital for surgery. He remained there for 60 days of treatment, after which he was allowed to go home for further recuperation. During his hospital stay, he incurred the following expenses: surgeon, $2,500; physician, $1,000; hospital bill for room and board, $250 per day; nursing services, $1,200; anesthetics, $600; wheelchair rental, $100; ambulance, $150; and drugs, $350. Zach has a major medical policy with Medical Benefits Corporation that has a $3,000 deductible clause, an 80 percent co-insurance clause, internal limits of $180 per day on hospital room and board, and $1,500 as a maximum surgical fee. The policy provides no disability income benefits.

Your assignment is to evaluate Zach Carey's medical insurance program. After reading his situation there are four questions. I want you to answer question 4. However, the type of information requested in questions 1-3 is what should be considered in answering question 4.

1.         Explain the policy provisions as they relate to deductibles, co-insurance, and internal limits.

2.         How much should Zach recover from the insurance company? How much must he pay out of his own pocket?

3.         Would any other policies have offered Zach additional protection? What about his inability to work while recovering from his injury?

4.         Based on the information presented, how would you assess Zach’s health care insurance coverage? Explain.

Your assignment is to evaluate Zach Carey's medical insurance program. After reading his situation there are four questions. I want you to answer question 4. However, the type of information requested in questions 1-3 is what should be considered in answering question 4.

Answer 1

Question 4:

Based on the information presented in the case study, it is clear that Zach will be able to recover $12,620 (calculations shown below) from the insurance company. However, he will have to pay $8,280 (calculations shown below) from his own pocket. In order to reduce the outflow from his own pocket, he should try to obtain an insurance coverage that reduces his burden for meeting medical expenses (or covers most expenses) in the event of any unfortunate event (s). Also, it is clear that Zach's current insurance coverage doesn't provide for no disability income benefits. Given Zach's per week salary, he lost around around $5,600 [700 (Amount Per Week)*4 (Number of Weeks in a Month)*2 (Number of Months)] of his income. So, it is extremely important for Zach to have an insurance coverage that provides disability income in case of any unforseen mishappening resulting in disability.

It can, therefore, be concluded that while Zach's insurance covered some of his medical expenses, Zach should try to obtain a coverage that covers more of out of pocket expenses and provides disability income.

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Notes:

The value of money that can be recovered from insurance company and is required to be borne by Zach from his own pocket is calculated as below:

Total Gross Medical Expenses = 2,500 (Surgeon Fees) + 1,000 (Bill for Room and Board) + 250*60 (Room Rent for 60 Days) + 1,200 (Nursing Services) + 600 (Anesthetics) + 100 (Wheelchair Rental) + 150 (Ambulance) + 350 (Drugs) = $20,900

Total Medical Expenses after Adjustment for Deductibles = Gross Medical Expenses - Deductible = 20,900 - 3,000 = $17,900

Total Amount that Zach can Recover from Insurance Company = 80%*(Medical Expenses After Adjustment for Deductibles - Actual Surgeon Fees - Total Actual Room Rent for 60 Days) + Total Room Rent Recovered from Insurance Company + Surgeon Fees Recovered from Insurance Company = 80%*(17,900 - 2,500 - 60*250) + 60*180 + 1,500 = $12,620

Total Amount that Zach will have to Pay = 20%*(Medical Expenses After Adjustment for Deductibles - Actual Surgeon Fees - Total Actual Room Rent for 60 Days) + (Total Actual Room Rent for 60 Days - Total Room Rent Recovered from Insurance Company) + (Actual Surgeon Fees - Surgeon Fees Recovered from Insurance Company) = 20%*(17,900 - 2,500 - 60*250) + 3,000 + (60*250 - 60*180) + (2,500 - 1,500) = $8,280