California Life-Only & Accident and Health AgentAccident and Health InsuranceMedium
Mrs. Davis has a health insurance policy with a $500 deductible and a 80/20 coinsurance clause. After meeting her deductible, she incurs $2,500 in covered medical expenses. How much will Mrs. Davis have to pay out-of-pocket for these expenses, in addition to her deductible?
- A$200
- B$400
- C$500
- D$2,000
Show answer & explanationAnswer & explanation
Correct answer: B. $400
After meeting the $500 deductible, the remaining $2,500 in expenses are subject to coinsurance. Mrs. Davis's 20% coinsurance means she pays 20% of $2,500, which is $500. $2,500 * 0.20 = $500.
Why the other options are wrong
- A. This would be 8% of the expenses, not 20%.
- C. This is the deductible amount, not the coinsurance portion.
- D. This would be 80% of the expenses, which is the insurer's portion, not the insured's.
Coinsurance
A provision in a health insurance policy that requires the insured to pay a percentage of covered medical expenses after the deductible has been met, with the insurer paying the remaining percentage.
- Applies after the deductible is satisfied.
- Expressed as a percentage (e.g., 80/20).
- Shares the cost of care between insurer and insured.
Memory trick: Deductibles Dedicate, Coinsurance Co-Share.