An insured covered by a group Major Medical plan is hospitalized after injuries that resulted from an automobile accident. Assuming the plan had a $1,000 deductible and an 80/20 Coinsurance clause, how much will the insured be responsible to pay with $11,000 in covered medical expenses?

An insured covered by a group Major Medical plan is hospitalized after injuries that resulted from an automobile accident. Assuming the plan had a $1,000 deductible and an 80/20 Coinsurance clause, how much will the insured be responsible to pay with $11,000 in covered medical expenses?

• A. $1,000
• B. $5,100
• C. $8,000
• D. $3,000

Answer: (D)

Deductible and coinsurance determine your out-of-pocket share after a loss. Start with the deductible: $1,000 is paid by the insured. That leaves $11,000 − $1,000 = $10,000 of covered charges subject to coinsurance. With an 80/20 coinsurance, the insured pays 20% of the remaining amount: 0.20 × $10,000 = $2,000. Add the deductible to get total out-of-pocket: $1,000 + $2,000 = $3,000. So the insured would pay $3,000 (the insurer would cover $8,000 of the remaining charges).

Deductible and coinsurance determine your out-of-pocket share after a loss. Start with the deductible: $1,000 is paid by the insured. That leaves $11,000 − $1,000 = $10,000 of covered charges subject to coinsurance. With an 80/20 coinsurance, the insured pays 20% of the remaining amount: 0.20 × $10,000 = $2,000. Add the deductible to get total out-of-pocket: $1,000 + $2,000 = $3,000. So the insured would pay $3,000 (the insurer would cover $8,000 of the remaining charges).