Question

The Baulding family has a basic health insurance plan that pays 80 percent of out-of-hospital expenses after a deductible of $250 per person. If three family members have doctor and prescription drug expenses of $632, $1,413, and $188 respectively, how much will the Baulding family and the insurance company each pay? How could they benefit from a flexible spending account established through Mr. Baulding's employer? What are the advantages and disadvantages of establishing such an account? The Baulding family will pay $ . (Round to the nearest dollar.)

Answer 1

Answer:

Baulding's healthcare plan has 80% coverage and 20% coinsurance plan .

Coinsurance plan : Generally in a health insurance plan , a coinsurance amount is the fixed percentage that the insurer will pay against the claim. THe most common breakdown is 80/20 split.

As the healthcare plan has a deductible of $250 per person , this is the amount an insurer would get from the insured in order to fulfill the claim made by the insured.

Calculation involves:

a) to calculate Coinsurance amount :

coinsurance amount = Claim after deductibles * percentage of coinsurance

And the total amount that the insurance company will pay = Total claim -(deductible+coinsurance amount)

The insurance claim details are as follows:

Family Members 1 2 3 $632 $1,413 $188 Total out-of-hospital expenses of all the members of the family Total Claim (cumulative) $632 $632+$1,413 = $2045 $2045+$188 = $2233 Deductible/person $250 $250 $250 Claim after deductible $382 $1158 $0 $0 Coinsurance amount (20%) $382*20% =$76.4 $1158*20% =$231.6 $0 Insurance company amount payable $632-(250+76.4) =$305.6 1413-(250+231.6) =$ 926.4

So, the amount Paid by the Baulding family = Deductable+ Coinsurance amount

= $750 + $76.4+$231.6 = $1058

And the total amount paid by the insurer = $1232

B)How could they benefit from a flexible spending account establishedby Baulding's employer ?

Advantage:

A flexible account has an advantage of taking care of the expenses i.e. paying for the health expenses which are not taken care by the health insurance policy such as the deductibles and the coinsurance amount as these two amounts hasve to be paid by the insured.

Here, Mr Baulding can benefit from the flexible spending account by paying off the expenses which are not covered in insurance policy with pre-tax dollars from the flexible spending account deposits as the amount deposited here is deducted from taxable income.

Disadvantage:

Only disadvantage is that there is restriction of time because if the flexible account's contribution is not utilised at the end of the year , it's bygone.