A family has a Medical Expense Insurance policy with a $1,000 deductible per person, a maximum of three deductibles per family, and an 80/20 coinsurance clause. If two family members each incur $1,500 in covered medical expenses in the same year, how much will the family owe in total for these two individuals after the deductible has been met for both?
- A$200
- B$600
- C$300
- D$500
Show answer & explanationAnswer & explanation
Correct answer: A. $200
Each person has a $1,000 deductible. For the first person, $1,500 - $1,000 (deductible) = $500 remaining. The family owes 20% of $500, which is $100. For the second person, the same applies: $1,500 - $1,000 (deductible) = $500 remaining. The family owes 20% of $500, which is $100. Total family out-of-pocket for coinsurance is $100 + $100 = $200. (The deductibles are already paid, $1000 x 2 = $2000 total paid by family for deductibles, so they are not included in the coinsurance calculation.)
Why the other options are wrong
- B. Incorrect. This would be 20% of $3,000, which ignores the deductibles.
- C. Incorrect. This would be 20% of $1,500, which is not how coinsurance works after a deductible.
- D. Incorrect. This is 1/3 of the remaining balance for both or 50% of one, not the correct coinsurance calculation.
Medical Expense Coinsurance Calculation
The process of determining the shared cost between the insurer and insured for covered medical expenses *after* the deductible has been met, typically expressed as a percentage.
- Applies only to covered expenses *above* the deductible.
- Common split is 80/20 (insurer pays 80%, insured pays 20%).
- Often has an out-of-pocket maximum.
Memory trick: Deductible first, then Coinsurance shares the 'REMAINING' bill.