Texas General Lines — Life, Accident, Health and HMOHealth InsuranceEasy
A client is covered by a health insurance policy with a $500 deductible and an 80/20 coinsurance clause, with a maximum out-of-pocket of $5,000. If the client incurs $10,000 in covered medical expenses, how much will the insurance company pay?
- A$7,500
- B$7,600
- C$7,900
- D$8,000
Show answer & explanationAnswer & explanation
Correct answer: B. $7,600
First, subtract the deductible from the total expenses ($10,000 - $500 = $9,500). Then, calculate the insurer's share of the remaining amount ($9,500 * 0.80 = $7,600). This amount is less than the out-of-pocket maximum.
Why the other options are wrong
- A. This calculation incorrectly applies coinsurance to the full expense or uses an incorrect percentage.
- C. This calculation likely misinterprets the deductible or coinsurance application.
- D. This calculation incorrectly assumes the insurer pays 80% of the total expenses without considering the deductible.
Coinsurance
A provision in a health insurance policy that states the percentage of covered medical expenses the insured must pay after the deductible has been met.
- Typically expressed as a ratio (e.g., 80/20).
- Applies after the deductible, up to the out-of-pocket maximum.
- Reduces the insurer's liability for a portion of the costs.
Memory trick: Deductible first, then coinsurance kicks in, up to the max.