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Suppose that Nathans employer provides a health insurance policy that pays 80 percent of $1 over the first $200 spent. If Nathan incurs $1,000 in
Suppose that Nathans employer provides a health insurance policy that pays 80 percent of $1 over the first $200 spent. If Nathan incurs $1,000 in expenses, how much will he pay out of pocket? What percentage of his expenses will this be?
- Nathan's insurance covers 80 percent of expenses over $1 for the first $200 spent.
- So, for the first $200, Nathan pays $1 (since the insurance pays 80 percent of $1).
- Nathan incurred $1,000 in expenses, and he already paid $1 for the initial $200. So, there's $1,000 - $200 - $1 = $799 remaining to be covered by the insurance.
Calculate the insurance coverage for the remaining $799:
- 80% of $799 = 0.80 * $799 = $639.20
- Nathan already paid $1 for the first $200 and the insurance covered $639.20 for the remaining expenses.
- Out of pocket expenses = Total expenses - Insurance coverage
- Out of pocket expenses = $1,000 - $1 - $639.20 = $359.80
- Percentage out of pocket = ($359.80 / $1,000) * 100 35.98%
So, Nathan will pay $359.80 out of pocket, which is approximately 36% of his total expenses of $1,000.
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