Wally has a group medical policy with a $500 annual deductible and an 80/20 coinsurance provision, with a $2,000 out of pocket limit on covered losses. Wally breaks his arm and has surgery that costs $12,000. How much will he have to pay for the surgery?

1. $2,000.
2. $2,300.
3. $2,500.
4. $2,800.