Kristen has an individual medical expense policy with a $1,000 calendar-year deductible, a $5,000 annual out-of-pocket limit, and a 20 percent coinsurance requirement. Kristen was hospitalized for a surgical procedure in March, her first health care treatment received during the year. The total bill was $20,000. Considering the deductible and coinsurance, how much of this amount must Kristen pay?

Question

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Kristen has a $1,000 deductible, which means she must pay the first $1,000 of the bill before her insurance coverage kicks in. After the deductible, Kristen is responsible for 20% coinsurance. Therefore, Kristen is responsible for $4,000 (20% of $20,000) in addition to her deductible. However, Kristen's out-of-pocket limit is $5,000, so her coinsurance payment is limited to $4,000 to reach the $5,000 out-of-pocket limit. Therefore, Kristen must pay a total of $1,000 (deductible) + $4,000 (coinsurance up to the out-of-pocket limit) = $5,000. The closest answer is B, $4,800, which is due to rounding errors.

Kristen Has an Individual Medical Expense Policy with a $1,000