Learning Goals:

Understand the concept of protection and how it relates to risk and risk management.

Understand the role of insurance in protecting human, financial, and property assets.

Understand the importance of basic estate planning documents.

Don and Kasey Johnson are a married couple.They are both 30 years old and they have a 3-year-old girl.Don is a loan officer and earns $75,000 a year. Kasey works as a retail store manager and earns $45,000 a year.Don's life expectancy is 80 years and Kasey's 82.They plan on retiring when they are 65.There are three health insurance policies that they could choose from (see page 3-5).

1.Health Insurance:

a.Help Don and Kasey to determine which of the three plans to choose.They want to know which plan would be best if they estimate their medical costs at approximately $2,500 per year and which plan to use if they estimate their medical costs closer to $25,000 per year.Help the Johnsons determine how much of their risk they should transfer and how much they should retain (for example a higher deductible means they are retaining more risk).

Low Medical Expenses (~$2,500/year)

High Medial Expenses (~$25,000/year)

Estimated Medical Cost:

FirstCare Bronze

FirstCare Gold

Blue Choice Gold

FirstCare Bronze

FirstCare Gold

Blue Choice Gold

Out of Pocket

Expenses:

12,700

12,700

31,500

12,700

12,700

10,500

Annual Premium:

2,519.64

3255.12

4004.28

2519.64

3255.12

4,004,28

Total Cost:

15,219.64

15,955.12

35,504.28

Which plan should they choose? And Why?

b.Now suppose you are choosing the insurance for yourself. Based on your own situation, what is your annual medical cost and which insurance are you going to choose based on your family, history, lifestyle, etc.?Why?

2.Life Insurance:

a.What type of life insurances the Johnsons get?

Term Life Insurance Cash-Value Whole Life Insurance None

b.Explain your reasoning with evidence from the course materials:

3.Disability Insurance:

a.What type of disability insurance should the Johnsons get?

Disability Insurance Coverage for Don: Short Term Long Term None

Disability Insurance Coverage for Kasey: Short Term Long Term None

b.Explain your reasoning with evidence from the course materials:

4.Long-Term Care Insurance:

a.Should the Johnsons get long-term care insurance? Yes No

b.Explain your reasoning with evidence from the course materials:

Deductibles and Cost Sharing

In Network

Out of Network

Deductible (Individual)

$4,500

$0

Deductible (Family)

$10,000

$0

Coinsurance

30%

$0

Out of Pocket Maximum (Individual)

$6,350

$0

Out of Pocket Maximum (Family)

$12,700

$0

Services

In Network

Out of Network

Primary Care Visit

$60

$0

Specialist Visit

$70 Copay after deductible

$0

In Patient Hospital Services

30% Coinsurance after deductible

$0

Emergency Room Services

$300 Copay after deductible

$300 copay

Mental / Behavioral Health

$70 copay

$0

Imaging (CT/PET Scans, MRIs)

30% coinsurance

$0

Rehabilitative Speech Therapy

$70 copay

$0

Rehabilitative Occupational & Physical Therapy

$70 copay

$0

Preventative Care

$0

$0

Laboratory Outpatient and Professional Services

$0

$0

X-ray and Diagnostic Imaging

30% coinsurance

$0

Prescription Drugs

In Network

Out of Network

Generic Rx

$20 Copay after deductible

Preferred Brand Rx

$50 Copay after deductible

Non Preferred Brand Rx

$70 Copay after deductible

Specialty Drugs

30% Coinsurance after deductible

Deductibles and Cost Sharing

In Network

Out of Network

Deductible (Individual)

$0

$0

Deductible (Family)

$0

$0

Coinsurance

20%

$0

Out of Pocket Maximum (Individual)

$6,350

$0

Out of Pocket Maximum (Family)

$12,700

$0

Services

In Network

Out of Network

Primary Care Visit

$30

$0

Specialist Visit

$50

$0

In Patient Hospital Services

20%

$0

Emergency Room Services

$250

$250 copay

Mental / Behavioral Health

$50 copay

$0

Imaging (CT/PET Scans, MRIs)

20% coinsurance

$0

Rehabilitative Speech Therapy

$50 copay

$0

Rehabilitative Occupational & Physical Therapy

$50 copay

$0

Preventative Care

$0

$0

Laboratory Outpatient and Professional Services

$0

$0

X-ray and Diagnostic Imaging

$0

$0

Prescription Drugs

In Network

Out of Network

Generic Rx

$20

Preferred Brand Rx

$50

Non Preferred Brand Rx

$70

Specialty Drugs

20%

Deductibles and Cost Sharing

In Network

Out of Network

Deductible (Individual)

$1,500

$3,000

Deductible (Family)

$4,500

$9,000

Coinsurance

20%

40%

Out of Pocket Maximum (Individual)

$3,500

$7,000

Out of Pocket Maximum (Family)

$10,500

$21,000

Services

In Network

Out of Network

Primary Care Visit

$10

40% coinsurance

Specialist Visit

$60

40% coinsurance

In Patient Hospital Services

$200 Copay per Stay and 20% Coinsurance

40% coinsurance

Emergency Room Services

$400 Copay and 20% Coinsurance a

20% coinsurance after $400 copay/visit

Mental / Behavioral Health

$10 copay

40% coinsurance

Imaging (CT/PET Scans, MRIs)

20% coinsurance

40% coinsurance

Rehabilitative Speech Therapy

20% coinsurance

40% coinsurance

Rehabilitative Occupational & Physical Therapy

20% coinsurance

40% coinsurance

Preventative Care

$0

40% coinsurance

Laboratory Outpatient and Professional Services

20% coinsurance

40% coinsurance

X-ray and Diagnostic Imaging

20% coinsurance

40% coinsurance

Prescription Drugs

In Network

Out of Network

Generic Rx

No Charge

Preferred Brand Rx

$35

Non Preferred Brand Rx

$75

Specialty Drugs

$150