Problem 1. Henry Expands His Health Insurance Coverage

Henry Morgan is 28 years old. He works for a company with a good health insurance plan. Indeed, Henry has heard its priced better than most plans and has consequently taken out the optional expanded dental and vision plans. While he doesnt currently wear glasses or contact lenses, he does go for an annual eye exam and wants the extra vision plan in case he ends up needing corrective lens or has any eye problems. His plan has a $40 co-payment for an annual eye exam and pays $100 toward eyeglass frames plus 20 percent of the rest of the cost. Contact lenses have similar coverage. Henry pays just an additional $15 monthly premium for the vision plan. Henry feels more comfortable having expanded health insurance coverage.

What do you think about Henrys decision to purchase the vision insurance?

Problem 2.

Edward Allen was a self-employed window washer earning approximately $700 per week. One day, while cleaning windows on the eighth floor of the Second National Bank Building, he tripped and fell from the scaffolding to the pavement below. He sustained multiple severe injuries but miraculously survived the accident. He was immediately rushed to the local hospital for surgery. Edward remained there for 60 days of treatment, after which he was allowed to go home for further recuperation. During his hospital stay, he incurred the following expenses: surgeon, $7,500, physician, $2,000, hospital bill for room and board, $250 per day; nursing services, $1,200; anesthetics, $600; wheelchair rental, $100; ambulance, $150; and drugs, $350. Edward has a major medical policy that has a $3,000 deductible clause, an 80 percent co-insurance clause, internal limits of $180 per day on hospital room and board, and $1,500 as a maximum surgical fee. The policy provides no disability income benefits.

• Explain the policy provisions as they relate to deductibles, co-insurance, and internal limits.
• How much should Edward recover from the insurance company? How much must he pay out of his own pocket?
• Would any other policies have offered Edward additional protection? What about his inability to work while recovering from his injury?
• Based on the information presented, how would you assess Edwards health care insurance coverage? Explain.

Chart for Question 2.B.

Medical Charge	Paid by Edward	Paid by Insurance
Surgeon fee of $7,500
Physician fee of $2,000
Hospital bill, room and board, $250/day for 60 days, $15,000
Nursing Services $1,200
anesthetics, $600
wheelchair rental, $100
ambulance, $150
drugs, $350.
Total before deductible and co-pay
Deductible paid by Edward
Balance subject to co-pay of 80/20
Total