The Newfeld Hospital has contracted with the Azalea Health Plan to provide inpatient services to Azalea's enrolled members. The contract calls for Azalea to provide specific stop-loss coverage to Newfeld once Newfeld's treatment costs reach $20,000 per case and for Newfeld to pay 20% of the next $50,000 of expenses for this case. After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs. The maximum amount for which Newfeld is at risk for any one Azalea plan member's treatment costs is

Question

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The maximum amount for which Newfeld is at risk for any one Azalea plan member's treatment costs is calculated as follows:

- Azalea provides stop-loss coverage to Newfeld once treatment costs reach $20,000 per case. This means that Newfeld is responsible for the first $20,000 of treatment costs for each case.
- After Newfeld's treatment costs on a case reach $20,000, Newfeld is responsible for paying 20% of the next $50,000 of expenses for this case. This means that if a case costs between $20,000 and $70,000, Newfeld is responsible for paying 20% of the costs between $20,000 and $70,000. This amounts to $10,000 ($50,000 * 20%).
- After Newfeld's treatment costs on a case reach $70,000, Azalea reimburses the hospital for all subsequent treatment costs. This means that if a case costs more than $70,000, Azalea covers the remaining costs.

Therefore, the total amount for which Newfeld is at risk for any one Azalea plan member's treatment costs is:

$20,000 (up to $20,000, Newfeld is responsible)
+ $10,000 (between $20,000 and $70,000, Newfeld pays 20%)
= $30,000

So, the correct answer is C) $30,000.

The Newfeld Hospital Has Contracted with the Azalea Health Plan