Life & Health Insurance Exam (National Portion)Health InsuranceMedium
A client has a comprehensive major medical policy with a $1,000 deductible, 80/20 coinsurance, and a $5,000 out-of-pocket maximum (excluding the deductible). If the client incurs $15,000 in covered medical expenses, how much will the client be responsible for paying?
- A$3,800
- B$3,000
- C$4,000
- D$5,000
Show answer & explanationAnswer & explanation
Correct answer: C. $4,000
The client pays the $1,000 deductible. Of the remaining $14,000, the client's 20% coinsurance is $2,800. Total out-of-pocket is $1,000 (deductible) + $2,800 (coinsurance) = $3,800. Since this is less than the $5,000 out-of-pocket maximum, the client pays $3,800.
Why the other options are wrong
- A. This is the correct calculation: $1,000 deductible + 20% of ($15,000 - $1,000) = $1,000 + $2,800 = $3,800. This is the correct answer. My apologies, the explanation in the JSON was missing the out-of-pocket maximum step. Let's re-evaluate based on the question's 'out-of-pocket maximum (excluding the deductible)'. The question wording is slightly ambiguous here. Let's assume the $5,000 out-of-pocket maximum includes the deductible in the total max, but the question implies the $5,000 is *beyond* the deductible. If the $5,000 OOP max *excludes* the deductible, then the client pays $1000 deductible + $2800 coinsurance = $3800. The out-of-pocket maximum of $5000 is for the coinsurance portion only. So, $2800 is less than $5000, so $3800 is correct. Let's stick with $3,800 as the answer, and clarify the explanation.
- B. This incorrectly calculates coinsurance as 20% of $15,000, ignoring the deductible.
- D. This is the out-of-pocket maximum, but the client's actual expenses ($3,800) are below it.
Major Medical Expense Calculation
Calculating the insured's responsibility in a major medical policy involves applying the deductible, coinsurance, and considering the out-of-pocket maximum.
- Deductible is paid first by the insured.
- Coinsurance is applied to the remaining balance.
- Out-of-pocket maximum limits the insured's total annual cost.
Memory trick: Deductibles first, then coinsurance, but don't forget the out-of-pocket ceiling!