Question

Susan, age 45, was severely injured in an auto accident. She is covered under her employer's PPO plan. The plan has a $500 calendar year deductible, 80/20 coinsurance, and an annual out-of-pocket maximum limit of $2,700 (including the deductible). As a result of an accident, Susan incurred the following medical expenses.

Ambulance ride to the hospital	$500
Overnight stay at the hospital	$4,500
Surgery for broken leg	$5,000
Prescription drugs	$100
Physical therapy for broken leg	$400

A.) How much will Susan have to pay out-of-pocket to cover the medical expenses?

B.) Explain how combining the qualified high-deductible health plan with a health savings account can help to reduce the costs for Susan.

Answer 1

(A). Under this 80/20 agreement, the person insured is responsible for 20 percent of his or her own medical costs, while the insurance company pays for the remaining 80 percent.

The term is applied only after deductible is met .

Susan's total medical expenses=$500+$4500+$5000+$100+$400=$10500

In $10500 susan First have to pay $500

and then 20 % of the remaining amount i,e; of $10000=$2000.

So, the total amount Susan have to pay out of pocket to cover medical expenses =$2000+$500=$2500. answer

(B)

A Health Savings Account allows individuals to pay for current health expenses and save for future qualified medical expenses on a pre-tax basis. Funds deposited into an HSA are not taxed, the balance in the HSA grows tax free, and that amount is available on a tax free basis to pay qualified medical expenses. When you enroll in an HDHP, the health plan also has a Health Savings Account (HSA).

An HSA plan may save you money through lower premiums, tax savings, and money deposited in your account which can be used to pay your deductible and other out-of-pocket medical expenses in the current year or in the future.

since the premium for the HDHP is lower than the PPO plan, you can contribute that difference (savings) into the Health Savings Account each month and possibly more. You may contribute up to the IRS Maximums below:

2019 Maximum Contributions to Health Savings Accounts (employer and employee):

Employee Only Coverage $3,500

Family (more than one person covered) $7,000

Catch-up Contributions $1,000 (age 55 or older)

So, Using the above combined qualified high deductible plan with HSA susan get maximum benefit with less deductible.