California Life-Only & Accident and Health AgentRelated Benefits and ProductsMedium
A client has a Medical Expense Insurance policy with a $500 deductible and 80/20 coinsurance. After meeting their deductible, they incur $3,000 in covered medical expenses. What amount will the client be responsible for paying?
- A$600
- B$1,000
- C$500
- D$1,100
Show answer & explanationAnswer & explanation
Correct answer: B. $1,000
The client first pays the $500 deductible. The remaining $2,500 ($3,000 - $500) is subject to coinsurance. With 80/20 coinsurance, the client pays 20% of the remaining amount, which is $2,500 * 0.20 = $500. Their total out-of-pocket is $500 (deductible) + $500 (coinsurance) = $1,000.
Why the other options are wrong
- A. This would be the coinsurance if the total bill was $3,000 and no deductible applied ($3,000 * 0.20 = $600).
- C. This only accounts for the deductible, not the coinsurance portion.
- D. This calculation is incorrect and doesn't follow standard deductible and coinsurance principles.
Medical Expense Coinsurance
A cost-sharing provision in medical expense insurance where the insured pays a percentage of the covered expenses after the deductible has been met, and the insurer pays the remaining percentage.
- Typical ratios are 80/20 or 70/30 (insurer/insured).
- Applies after the deductible, up to the out-of-pocket maximum.
- Encourages responsible healthcare utilization.
Memory trick: Deductible first, then coinsurance's burst!