In: Accounting
Ronald Roth started his new job as controller with Aerosystems today. Carole, 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.
The HMO is provided to employees free of charge. The copayment for doctors' office visits and major medical charges is $15. Prescription copayments are $15. The HMO pays 100 percent after Ronald's copayment. There is no annual deductible.
The POS requires that the employee pay $25.49 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. He can also choose to use a health care provider out of the service and pay 15 percent of all charges after he pays a $400 deductible. The POS will pay for 85 percent of those covered visits. There is no annual deductible for in-network charges.
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 $135 for each visit. He also spent $86 and $103 on prescriptions during the year. (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.)
If Ronald selects the POS plan, what would his annual medical costs be? (Round your intermediate calculations and final answer to 2 decimal places.)
Given:
Ronald visited general physician five times during the year at a cost of $135 for each visit.
Total cost for Doctors visit = 5 * 135 = $675
Money Spent for prescription = $86 + $103 = $189
Total Expenses = Total cost for Doctors visit + Money spent for prescription
Total Expenses = $675 + $189 = $864
Ronald will pay under Blue Cross/Blue Shield plan:
Yearly premium = Monthly premium Cost * 12 months
= $44.07 * 12 = $528.84
Annual Deductible = $250
Ronald will be responsible for 15 percent of charges for Doctor visit and Prescription.
Expense = 15% * 864 = $129.60
Total Expense = $528.84 + $250 + $129.60
Total Expense = $908.44
Ronald will pay under HMO plan:
Co-payment for Doctors visit = $15
Co-payment for Prescription = $15
Total Co-payment for Doctors visit = 5* 15 = $75
Total Co-payment for Prescription = 2* 15 = $30
Total Expenses = $75 + $15 = $90
Ronald will pay under POS plan:
Yearly Premium = Monthly premium * 12 months
= $25.49 * 12 = $305.88
Annual Deductible = $400
Ronald will be responsible for 15 percent of charges for Doctor visit and Prescription.
Expense = 15% * 864 = $129.60
Total Expense = $305.88 + $400 + $129.60
= $835.48