Learning Goals: Understand the concept of protection and how it relates to risk and risk management. Understand
Question:
Learning Goals:
Understand the concept of protection and how it relates to risk and risk management.
Understand the role of insurance in protecting human, financial, and property assets.
Understand the importance of basic estate planning documents.
Don and Kasey Johnson are a married couple.They are both 30 years old and they have a 3-year-old girl.Don is a loan officer and earns $75,000 a year. Kasey works as a retail store manager and earns $45,000 a year.Don's life expectancy is 80 years and Kasey's 82.They plan on retiring when they are 65.There are three health insurance policies that they could choose from (see page 3-5).
1.Health Insurance:
a.Help Don and Kasey to determine which of the three plans to choose.They want to know which plan would be best if they estimate their medical costs at approximately $2,500 per year and which plan to use if they estimate their medical costs closer to $25,000 per year.Help the Johnsons determine how much of their risk they should transfer and how much they should retain (for example a higher deductible means they are retaining more risk).
Low Medical Expenses (~$2,500/year)
High Medial Expenses (~$25,000/year)
Estimated Medical Cost:
FirstCare Bronze
FirstCare Gold
Blue Choice Gold
FirstCare Bronze
FirstCare Gold
Blue Choice Gold
Out of Pocket
Expenses:
12,700
12,700
31,500
12,700
12,700
10,500
Annual Premium:
2,519.64
3255.12
4004.28
2519.64
3255.12
4,004,28
Total Cost:
15,219.64
15,955.12
35,504.28
Which plan should they choose? And Why?
b.Now suppose you are choosing the insurance for yourself. Based on your own situation, what is your annual medical cost and which insurance are you going to choose based on your family, history, lifestyle, etc.?Why?
2.Life Insurance:
a.What type of life insurances the Johnsons get?
Term Life Insurance Cash-Value Whole Life Insurance None
b.Explain your reasoning with evidence from the course materials:
3.Disability Insurance:
a.What type of disability insurance should the Johnsons get?
Disability Insurance Coverage for Don: Short Term Long Term None
Disability Insurance Coverage for Kasey: Short Term Long Term None
b.Explain your reasoning with evidence from the course materials:
4.Long-Term Care Insurance:
a.Should the Johnsons get long-term care insurance? Yes No
b.Explain your reasoning with evidence from the course materials:
Deductibles and Cost Sharing
In Network
Out of Network
Deductible (Individual)
$4,500
$0
Deductible (Family)
$10,000
$0
Coinsurance
30%
$0
Out of Pocket Maximum (Individual)
$6,350
$0
Out of Pocket Maximum (Family)
$12,700
$0
Services
In Network
Out of Network
Primary Care Visit
$60
$0
Specialist Visit
$70 Copay after deductible
$0
In Patient Hospital Services
30% Coinsurance after deductible
$0
Emergency Room Services
$300 Copay after deductible
$300 copay
Mental / Behavioral Health
$70 copay
$0
Imaging (CT/PET Scans, MRIs)
30% coinsurance
$0
Rehabilitative Speech Therapy
$70 copay
$0
Rehabilitative Occupational & Physical Therapy
$70 copay
$0
Preventative Care
$0
$0
Laboratory Outpatient and Professional Services
$0
$0
X-ray and Diagnostic Imaging
30% coinsurance
$0
Prescription Drugs
In Network
Out of Network
Generic Rx
$20 Copay after deductible
Preferred Brand Rx
$50 Copay after deductible
Non Preferred Brand Rx
$70 Copay after deductible
Specialty Drugs
30% Coinsurance after deductible
Deductibles and Cost Sharing
In Network
Out of Network
Deductible (Individual)
$0
$0
Deductible (Family)
$0
$0
Coinsurance
20%
$0
Out of Pocket Maximum (Individual)
$6,350
$0
Out of Pocket Maximum (Family)
$12,700
$0
Services
In Network
Out of Network
Primary Care Visit
$30
$0
Specialist Visit
$50
$0
In Patient Hospital Services
20%
$0
Emergency Room Services
$250
$250 copay
Mental / Behavioral Health
$50 copay
$0
Imaging (CT/PET Scans, MRIs)
20% coinsurance
$0
Rehabilitative Speech Therapy
$50 copay
$0
Rehabilitative Occupational & Physical Therapy
$50 copay
$0
Preventative Care
$0
$0
Laboratory Outpatient and Professional Services
$0
$0
X-ray and Diagnostic Imaging
$0
$0
Prescription Drugs
In Network
Out of Network
Generic Rx
$20
Preferred Brand Rx
$50
Non Preferred Brand Rx
$70
Specialty Drugs
20%
Deductibles and Cost Sharing
In Network
Out of Network
Deductible (Individual)
$1,500
$3,000
Deductible (Family)
$4,500
$9,000
Coinsurance
20%
40%
Out of Pocket Maximum (Individual)
$3,500
$7,000
Out of Pocket Maximum (Family)
$10,500
$21,000
Services
In Network
Out of Network
Primary Care Visit
$10
40% coinsurance
Specialist Visit
$60
40% coinsurance
In Patient Hospital Services
$200 Copay per Stay and 20% Coinsurance
40% coinsurance
Emergency Room Services
$400 Copay and 20% Coinsurance a
20% coinsurance after $400 copay/visit
Mental / Behavioral Health
$10 copay
40% coinsurance
Imaging (CT/PET Scans, MRIs)
20% coinsurance
40% coinsurance
Rehabilitative Speech Therapy
20% coinsurance
40% coinsurance
Rehabilitative Occupational & Physical Therapy
20% coinsurance
40% coinsurance
Preventative Care
$0
40% coinsurance
Laboratory Outpatient and Professional Services
20% coinsurance
40% coinsurance
X-ray and Diagnostic Imaging
20% coinsurance
40% coinsurance
Prescription Drugs
In Network
Out of Network
Generic Rx
No Charge
Preferred Brand Rx
$35
Non Preferred Brand Rx
$75
Specialty Drugs
$150
Expert Answer:
