Question

As a part-time employee, Rachel does not qualify for any benefits from her current employer. Seeing a need for a health care program, Rachel went shopping for health insurance and is trying to decide between two options with a national health insurance provider. The benefits of each option are outlined in the tables below. OPTION 1: Fee-for-service OPTION 2: HMO $225 monthly premium $630 monthly premium $7,500 deductible No annual deductible Co-pays: Co-pays: Name-brand Drugs: $30 Name-brand Drugs: $25 Generic Drugs: $12 Generic Drugs $10 Visits: Visits: Primary Care Physician $30 Primary Care Physician $20 Specialist: $75 Specialist: $62 Urgent Care: $100 Urgent Care: $50 Emergency Room: $250 Emergency Room: $175 The first option is a fee-for-service plan with a $7,500 deductible. Rachel must pay the deductible amount in health-related costs (not including co-pays) before the insurance company will contribute. This plan costs $225.00 per month and requires co-pays for most standard healthcare costs. The second option is an HMO. It is significantly more expensive at $630 per month, but has no annual deductible. The standard co-pays are also less than those in the other option. Rachel is a young lady with very few health care requirements. She anticipates one monthly visit to her primary care physician, and one annual visit to her allergy specialist. She has two generic prescription allergy medicines that need to be filled twice a month. If Rachel is able to stay healthy the entire year and does not accrue any additional health care costs, which of the following statements is true for her situation? a. The higher co-pays and annual deductible make Option 1 more expensive than Option 2. b. The higher premium for Option 2 offsets the lower co-pays making the two options the same value. c. Rachel's health care needs will cost less under Option 1 if she is able to avoid additional health care costs. d. Even though she pays more monthly, the insurance company will cover more of Rachel's health care costs under option 2.

Answer 1

After calculating annual healthcare costs for the two options based on Rachel's expected usage, Option 1 (Fee-for-service) will cost her $3,423, and Option 2 (HMO) will cost her $8,102. Thus, Option 1 is the more cost-effective choice for Rachel.

Step-by-step explanation:

To determine which health insurance option is more cost-effective for Rachel, we need to compare the annual costs associated with each plan under her expected healthcare usage. Let's calculate the total healthcare costs for each option based on the given information.

Option 1 (Fee-for-service):

Monthly premium: $225 x 12 months = $2,700

Deductible: $7,500 (not met, since Rachel's costs are below this amount)

Primary Care Physician visit: $30 x 12 visits = $360

Allergy Specialist visit: $75 x 1 visit = $75

Generic Drugs: $12 x 2 prescriptions x 12 months = $288

Total Cost for Option 1 = $2,700 (premiums) + $360 (PCP visits) + $75 (specialist visit) + $288 (drugs) = $3,423

Option 2 (HMO):

Monthly premium: $630 x 12 months = $7,560

No deductible

Primary Care Physician visit: $20 x 12 visits = $240

Allergy Specialist visit: $62 x 1 visit = $62

Generic Drugs: $10 x 2 prescriptions x 12 months = $240

Total Cost for Option 2 = $7,560 (premiums) + $240 (PCP visits) + $62 (specialist visit) + $240 (drugs) = $8,102

Comparing the total costs, Rachel will pay $3,423 for Option 1 and $8,102 for Option 2. Since Rachel has very few healthcare requirements and the total costs for Option 1 are lower than Option 2, the correct statement is:

c. Rachel's health care needs will cost less under Option 1 if she is able to avoid additional health care costs.

Answer 2

C is the correct answer here hope I helped