Question

# Laura moore has a choice at work between a traditional health insurance plan that pays 80%...

Laura moore has a choice at work between a traditional health insurance plan that pays 80% of the cost of doctor visits after a \$250 deductible and an HMO that charges a \$5 co-payment per visit plus a \$21 monthly premium deduction from her paycheck. Laura anticipates seeing a doctor once a month for her high blood pressure. The cost of each office visit is \$60. She normally sees the doctor an average of 3 times a year for other health concerns. Comment on the difference in cost between the two health care plans and the advantages and disadvantages of each.

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Solution

We will analyse from cost perspective, the alternative with lower cost should be selected.

Total no. of doctor visit = 12 monthly visit + 3 times special visit = 15

Cost = 50 * 15 = \$900

Cost of plan = \$ 250 + (20% of doctor visiting charges) = 250 + 20% of 900 = \$430

Under HMO

Premium = 21 * 12 months = \$252

Co payment = 5 * 15 = 75

Total = \$ 327

There is a saving of \$5 in HMO, so she should opt for this option. Moreover, the benefit of HMO would be the payments are monthly in small installments ,rather than a big outflow as in the case of traditonal plan.

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