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

1. The monthly premium cost to Ronald for theBlue Cross/Blue Shieldplan will be $44.32. For all doctor office visits, prescriptions, and major medical charges, Ronald will be responsible for 20 percent and the insurance company will cover 80 percent of covered charges. The annual deductible is $500.
2. TheHMOis provided to employees free of charge. The copayment for doctors' office visits and major medical charges is $35. Prescription copayments are $30. The HMO pays 100 percent after Ronald's copayment. There is no annual deductible.
3. ThePOSrequires that the employee pay $26.44 per month to supplement the cost of the program with the company's payment. If Ron 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 out of the service and pay 20 percent of all charges after he pays a $500 deductible. The POS will pay for 80 percent of those covered visits. There is no annual deductible.

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 $165 for each visit. He also spent $73 and $99 on prescriptions during the year. (For the purposes of the POS computation, assume that Ron 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?

The other question is:

You are a dual-income, no-kids family. You and your spouse have the following debts:

Mortgage = $214,000; Auto loan = $10,800; Credit card balance = $2,400; and other debts = $6,820. Further, you estimate that your funeral will cost $7,500. Your spouse expects to continue to work after your death. Using the DINK method, what should be your need for life insurance?

The other question is:

Suppose you are 46 and have a $70,000 face amount, 14-year, limited-payment, participating policy (dividends will be used to build up the cash value of the policy). Your annual premium is $245. The cash value of the policy is expected to be $2,800 in 14 years. Using time value of money and assuming you could invest your money elsewhere at an annual yield of 8 percent, calculate the net cost of insurance. UseExhibit 1-B.