Question

Juan is a college graduate and works as an accountant earning $60,000 a year.He bought group insurance with a $250 deductible, 10% co-insurance, and a $5,000 out-of-pocket maximum. Juan is in an accident, and the TOTAL cost is $40,000. How much does he owe?

Answer 1

Juan owes a total of $4,225 for the accident. He pays a $250 deductible and then 10% co-insurance of the remaining amount, but his expenses are capped by a $5,000 out-of-pocket maximum.

Step-by-step explanation:

The question asks how much Juan will owe after he is in an accident with a total cost of $40,000, considering he has group insurance with specific terms. To figure this out, we will follow these steps:

1. Juan will first pay his deductible of $250.
2. After the deductible, the remaining amount is $40,000 - $250 = $39,750.
3. On this remaining amount, Juan will pay 10% co-insurance, which amounts to $39,750 * 10% = $3,975.
4. However, Juan's out-of-pocket maximum is $5,000. Since the sum of his deductible and co-insurance ($250 + $3,975 = $4,225) does not exceed the out-of-pocket maximum, he is responsible for this amount. Juan does not have to pay more than the out-of-pocket maximum for his covered expenses in a year.

Therefore, Juan owes a total of $4,225 for the accident.