8.)

Ronald started his new job as a controller with Aerosystems today. Carole, the employee benefits clerk, gave Ronald a packet that contained information on the companys health insurance options. Aerosystems offers its employees the choice between a private insurance company plan (Blue Cross or Blue Shield), an HMO, and a PPO. Ronald needs to review the packet and make a decision on which health care program best fits his needs. The following is an overview of that information.

a. The monthly premium cost for Ronald for the Blue Cross or Blue Shield plan will be $49.43. For all doctor's office visits, prescriptions, and major medical charges, Ronald will be responsible for 20 percent and the insurance company will cover 80 percent of the covered charges. The annual deductible is $500.

b. The HMO is provided to employees free of charge. The copayment for doctors office visits and major medical charges is $20. Prescription copayments are $20. The HMO pays 100 percent after Ronalds copayment. There is no annual deductible.

c. The POS requires that the employees pay $28.44 per month to supplement the cost of the program with the companys payment. If Ronald uses health care providers within the plan, he pays the copayments as described above for the HMO. He can also choose to use a health care provider outside of the service and pay 20 percent of the covered charges after he pays a $500 deductible. The POS will pay for 80 percent of those covered visits. There is no annual deductible for in-network expenses.

Ronald decided to review his medical bills from the previous year to see what costs he had incurred and to help him evaluate his choices. He visited his general physician four times during the year at a cost of $209 for each visit. He also spent $67 and $90 on prescriptions during the year. (For the purposes of the POS computation, assume that Ronald visited a physician outside of the network plan. Assume he had his prescriptions filled at a network-approved pharmacy.)

What total costs will Ronald pay if he enrolls in the HMO plan?

Annual Medical Cost: