Texas General Lines — Life, Accident, Health and HMOHealth InsuranceHard
A client is covered by a medical expense policy with a $1,000 deductible, 90/10 coinsurance, and a $10,000 out-of-pocket maximum. They incur $100,000 in covered medical expenses. How much will the client be responsible for paying?
- A$10,000
- B$9,000
- C$1,000
- D$10,900
Show answer & explanationAnswer & explanation
Correct answer: A. $10,000
First, the client pays the $1,000 deductible. The remaining $99,000 ($100,000 - $1,000) is subject to 90/10 coinsurance. The client's 10% share would be $9,900. Adding the deductible ($1,000 + $9,900 = $10,900) exceeds the $10,000 out-of-pocket maximum. Therefore, the client's responsibility is capped at $10,000.
Why the other options are wrong
- B. This incorrectly calculates the client's share or misapplies the out-of-pocket maximum.
- C. This only accounts for the deductible, ignoring coinsurance and the out-of-pocket maximum.
- D. This is the calculated client's share ($1,000 deductible + $9,900 coinsurance) *before* applying the out-of-pocket maximum.
Out-of-Pocket Maximum (Health Insurance)
The maximum amount of money an insured person must pay for covered medical expenses in a policy year. Once this limit is reached, the insurance company pays 100% of additional covered costs.
- Includes deductibles, copayments, and coinsurance payments.
- Does not include premiums.
- Protects insureds from catastrophic medical bills.
- Higher maximums generally mean lower premiums.
Memory trick: Deductible + Coinsurance = Total, but don't exceed the Out-of-Pocket Cap!