An insured has incurred $12,000 in medical expenses from an illness.How much will he collect from a group major medical plan that has an 80/20 participation clause and a $500 deductible?

Question

Quizplus · Accepted Answer

The insured must first pay the $500 deductible before the plan begins to pay. Therefore, the remaining amount is $11,500 ($12,000 - $500). The 80/20 participation clause means the plan will pay 80% of the remaining amount, which is $9,200 ($11,500 x 0.8). The insured will be responsible for the remaining 20%, which is $2,300 ($11,500 x 0.2). Thus, the insured will collect $9,200 from the group major medical plan.

An Insured Has Incurred $12,000 in Medical Expenses from an Illness.How