Problem $11-7$ Evaluating Health Insurance Options $[$L$011-4]$

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

company's 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

$$44\mathrm{.}47.$ 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 $$20.$ Prescription copayments are $$15.$

The HMO pays $100$ percent after Ronald's copayment. There is no annual

deductible.

c$.$ The POS requires that the employees pay $$25\mathrm{.}44$ per month to supplement the cost

of the program with the company's 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 $$199$ for each visit. He also spent $$74$ and $$97$

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 annual medical costs will Ronald pay using the sample medical expenses

provided if he were to enroll in the Blue Cross or Blue Shield plan?

Note: Round your intermediate calculations and final answer to $2$ decimal places.