Megan, age 28, is insured under an individual major medical policy. The plan

has a calendar-year deductible of $1,500, a 25 percent coinsurance provision,

and an annual out-of-pocket limit of $4,000. Megan recently had arthroscopic

surgery on her knee, which she injured while playing softball. The surgery

was performed in an outpatient surgical center. Megan incurred the following

charges:

– Outpatient X-rays and diagnostic tests: $800

– Covered charges in the surgical center: $10,000

– Surgeon’s fee: $3,000

– Outpatient prescription drugs (generic): $200

– Physical therapy: $1,500

In addition, Megan could not work for two weeks and lost $2,000 in earned

income.

a. Based on the above information, how much of the loss will be paid by the

insurance company? Explain your answer.

b. Why is coinsurance used in a major medical policy?

c. Identify several exclusions in a typical major medical policy. LO12