Oscar Wang was seriously injured in a snowboarding accident that broke both his legs and an arm. His medical expenses included five days of hospitalization at $700 a day, $5,100 in surgical fees, $6,600 in physician's fees (including time in the hospital and six follow-up office visits), $560 in prescription medications, and $2,600 for physical therapy treatments. All of these charges fall within customary and reasonable payment amounts.

1. If Oscar had an indemnity plan that pays 80 percent of his charges with a $500 deductible and a $5,000 stop-loss provision, how much would he have to pay out of pocket? Round the answer to the nearest dollar.

   $

2. What would Oscar's out-of-pocket expenses be if he belonged to an HMO with a $40 co-pay for office visits? Assume there are no other out-of-pocket costs. Round the answer to the nearest dollar.

   $

3. Monthly premiums are $315 for the indemnity plan and $375 for the HMO. If he has no other medical expenses this year, which plan provides more cost-effective coverage for Oscar?

   HMO or Indemnity

Use Worksheet 9.2. Asher Perkins, a 35-year-old computer programmer, earns $93,000 a year. His monthly take-home pay is $4,900. His wife, Ellie, works part-time at their children's elementary school but receives no benefits. Under state law, Ellie's employer contributes to a workers' compensation insurance fund that would provide $1,950 per month for six months if Asher were disabled and unable to work.

1. Use Worksheet 9.2 to calculate Asher's disability insurance needs, assuming that he won't qualify for Medicare under his Social Security benefits. Round your answer to the nearest whole.

   $

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Chapter 9 Critical Thinking Case 2 Valeria and Matias Rivera Evaluate Their Disability Income Needs

Valeria and Matias Rivera have been married for two years and have a 1-year-old son. They live in Richmond, Virginia, where Matias works for Software Solutions. He earns $5,300 per month, of which he takes home $4,000. Matias and his family are entitled to receive the benefits provided by the company's group health insurance policy. In addition to major medical coverage, the policy provides a monthly disability income benefit amounting to 15 percent of the employee's average monthly take-home pay for the most recent 12 months prior to incurring the disability. ( Note: Matias' average monthly take-home pay for the most recent year is equal to his current monthly take-home pay.) In case of complete disability, Matias would also be eligible for Social Security payments of $1,400 per month.

Valeria is also employed. She earns $1,600 per month after taxes by working part-time at a nearby grocery store. As a part-time employee, the store gives her no benefits. Should Matias become disabled, Valeria would continue to work at her part-time job. If she became disabled, Social Security would provide monthly income of $700. Valeria and Matias spend 90 percent of their combined take-home pay to meet their bills and provide for a variety of necessary items. They use the remaining 10 percent to fulfill their entertainment and savings goals.

1. How much, if any, additional disability income insurance does the Rivera family require to ensure adequate protection against Matias becoming completely disabled? Use Worksheet 9.2 to assess his needs. Assume that Matias and Valeria would like to have 100% of their combined take-home pay.

   $

2. Does Valeria need any disability income coverage? Assume that Matias and Valeria need 90% of their combined take-home pay in order to meet their bills and provide for a variety of necessity items.

   -Select-YesNoItem 2

DISABILITY BENEFIT NEEDS Name(s) Date 1. $ 2. $ Estimate current monthly take-home pay Estimate existing monthly benefits a. Social Security benefits b. Other government program benefits c. Company disability benefits d. Group disability policy benefits Total existing monthly disability benefits (2a + 2b +2c + 2d) 3. $ 4. Estimated monthly disability benefits needed ([1]-[3]) $ DISABILITY BENEFIT NEEDS Name(s) Date 1. $ 2. $ Estimate current monthly take-home pay Estimate existing monthly benefits a. Social Security benefits b. Other government program benefits c. Company disability benefits d. Group disability policy benefits Total existing monthly disability benefits (2a + 2b +2c + 2d) 3. $ 4. Estimated monthly disability benefits needed ([1]-[3]) $