Life & Health Insurance Exam (National Portion)Policy Provisions, Options, and RidersMedium
A health insurance policy includes a Coinsurance clause stating 80/20 after the deductible. If the insured has a $1,000 deductible and incurs $11,000 in covered medical expenses, what amount will the insured be responsible for paying?
- A$2,000
- B$1,000
- C$3,000
- D$3,200
Show answer & explanationAnswer & explanation
Correct answer: C. $3,000
First, subtract the deductible from the total expenses: $11,000 - $1,000 = $10,000. This is the amount subject to coinsurance. The insured's 20% coinsurance share is 0.20 * $10,000 = $2,000. Add the deductible back to this amount: $1,000 (deductible) + $2,000 (coinsurance) = $3,000. So, the insured is responsible for $3,000.
Why the other options are wrong
- A. This only accounts for the coinsurance portion, not the deductible.
- B. This only accounts for the deductible, not the coinsurance.
- D. This calculation is incorrect, perhaps from applying coinsurance to the total expense before the deductible.
Coinsurance Calculation
The process of determining the insured's financial responsibility for covered medical expenses after the deductible has been met, based on a percentage split.
- Deductible paid first
- Coinsurance applied to remaining balance
- Common splits: 80/20, 70/30
Memory trick: Deductible FIRST, then COINSURANCE SPLIT