Life & Health Insurance Exam (National Portion)Health InsuranceEasy
A client has an individual health insurance policy with a deductible of $1,000 and an 80/20 coinsurance clause. After meeting the deductible, the client incurs $5,000 in covered medical expenses. How much will the client be responsible for paying?
- A$1,800
- B$800
- C$2,000
- D$1,000
Show answer & explanationAnswer & explanation
Correct answer: A. $1,800
The client is responsible for the $1,000 deductible plus 20% of the remaining $4,000 in expenses ($5,000 - $1,000 = $4,000). 20% of $4,000 is $800. Therefore, the total out-of-pocket cost is $1,000 + $800 = $1,800.
Why the other options are wrong
- B. This only accounts for the coinsurance portion, not the deductible.
- C. This incorrectly calculates the coinsurance portion or does not include the deductible.
- D. This only accounts for the deductible, not the coinsurance portion of the remaining expenses.
Deductible and Coinsurance
A deductible is the amount an insured must pay out-of-pocket before the insurer begins to pay. Coinsurance is the percentage of covered expenses the insured shares with the insurer after the deductible is met.
- Deductible is paid first.
- Coinsurance applies to expenses after the deductible.
- Common coinsurance is 80/20, meaning insurer pays 80%, insured pays 20%.
Memory trick: Don't Deduct, Co-Share the Care!