WHICH HEALTHCARE POLICY IS CHEAPER? - FINANCIAL MATH, SIMPLE MATHEMATICS, EXAMPLES FOR PERSONAL FINANCES
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8.5 WHICH HEALTHCARE POLICY IS CHEAPER? - FINANCIAL MATH, SIMPLE MATHEMATICS, EXAMPLES FOR PERSONAL FINANCES
We ran this quiz a number of years ago and later put it up on the Internet. To our surprise several irate people wrote to say that we had not done our math correctly and that we needed to correct the answer. However, the math below is correct; no wonder many people have trouble with credit cards or balancing their check books.
Health insurance Policy A costs you $250 per month with a $200 deductible per year. Once you have paid the deductible you are responsible for co-payments of 20%.
Policy B is the same as policy A with one difference. It has a $1000 deductible and only costs $200 per month.
In the first year you have medical expenses of $500 and in the second year expenses of $900. Which policy costs less for those two years when your out-of-pocket expenses are added to the cost of the insurance? How much was the difference?
ANSWER: Policy B. Total expenses were $400 less.