(a) To help her make a decision, Taliesha has asked you to list two positive points and two negative points about each plan. Prepare such a list.
(b) Why might Taliesha’s employer provide an incentive of dental insurance if she chooses option B?
(c) Which plan would you recommend to Taliesha? Why?
Your friend Taliesha Jackson of Stillwater, Oklahoma, recently changed to a new job as a CPA in a moderate-size accounting firm. Knowing that you were taking a personal finance course, she asked your advice about selecting the best health insurance plan. Her employer offered five options. In addition, she could open a flexible spending arrangement and pay any premiums she must pay through a premium conversion plan:
• Option A: A standard health insurance plan with a $500 annual deductible and an 80 percent/20 percent coinsurance clause with a $2000 out-of-pocket limit. Taliesha must pay $80 per month toward this plan.
• Option B: Same as option A except that a PPO is associated with the plan. If Taliesha agrees to have services provided by the PPO, her annual deductible drops to $200 and the coinsurance clause is waived. As an incentive to get employees to select option B, Taliesha’s employer will provide dental expense insurance worth about $40 per month.
• Option C: Another health insurance plan with a $200 annual deductible and a 90 percent/10 percent coinsurance clause with a $1000 out-of-pocket limit. Taliesha must pay $170 per month toward the cost of this plan.
• Option D: Membership in an HMO. Taliesha will have to contribute $40 extra each month if she chooses this option.