Question

An employee started a new job and must enroll in a new family health insurance plan. One of the plans involves prescription drug coverage. The employee estimates that the entire family will fill 10 prescriptions per month, totaling $1,250. The employee has two options to choose from:

Option A: $94 monthly premium; 80% coverage for all prescription costs
Option B: $42 monthly premium; 75% coverage for first $500 in prescription costs, then 85% coverage for all prescription costs over $500

Which option would result in the highest overall cost for the employee, and by how much?

Option A has the highest overall cost by $64.50.
Option B has the highest overall cost by $64.50.
Option A has the highest overall cost by $106.50.
Option B has the highest overall cost by $106.50

Answer 1

Option A would result in the highest overall cost for the employee by $64.50.

Step-by-step explanation:

Option A would result in the highest overall cost for the employee. To calculate the overall cost for each option, we need to consider the monthly premium and the prescription costs.

For Option A, the monthly premium is $94. The prescription costs covered by the employee would be 20% of the total, which is $1,250. Therefore, the employee would pay $1,250 x 0.2 = $250 for prescription costs. The total cost for Option A would be $94 + $250 = $344.

For Option B, the monthly premium is $42. The prescription costs covered by the employee would be 25% of the first $500, which is $500 x 0.25 = $125, and 15% of the remaining $750, which is $750 x 0.15 = $112.50. Therefore, the employee would pay $125 + $112.50 = $237.50 for prescription costs. The total cost for Option B would be $42 + $237.50 = $279.50.

The difference in overall cost between Option A and Option B is $344 - $279.50 = $64.50. Therefore, Option A has the highest overall cost by $64.50.