What amount of loss did the insurance company pay?

Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $\$ 100$, yet a person with health insurance pays only $\$ 20$ out of pocket. Her insurance company pays the remaining $\$ 80$. (The insurance company recoups the $\$ 80$ through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undertake.)

What sort of policies might prevent this excessive use?

Suppose you have a traditional health insurance plan that pays for 80% of your medical bills. How much would your out-of-pocket costs be for a $200 bill?

Consider how health insurance affects the quantity of healthcare services performed. Suppose that the typical medical procedure has a cost of $100, yet a person with health insurance pays only$20 out of pocket. Her insurance company pays the remaining $80. (The insurance company recoups the$80 through premiums, but the premium a person pays does not depend on how many procedures that person chooses to undertake.) a. Draw the demand curve in the market for medical care. (In your diagram, the horizontal axis should represent the number of medical procedures.) Show the quantity of procedures demanded if each procedure has a price of $100. b. On your diagram, show the quantity of procedures demanded if consumers pay only$20 per procedure. If the cost of each procedure to society is truly $100, and if individuals have health insurance as just described, will the number of procedures performed maximize total surplus? Explain. c. Economists often blame the health insurance system for excessive use of medical care. Given your analysis, why might the use of care be viewed as “excessive”? d. What sort of policies might prevent this excessive use?

Compute the out-of-pocket expenses in the following situation. Tom's medical insurance will pay 80 percent of the cost of a procedure. The policy sets an allowable limit for the procedure at $1,000. Tom's doctor bills the insurer for$1,300. How much will Tom have to pay?

Alicia was recently hospitalized for a serious illness. The total bill for her medical care was $\$ 12,780$. Alicia's medical insurance only covered $\$ 11,960$ of the bill. The insurance company also subtracted a $\$ 500$ deductible and her policy requires her to pay $15 \%$ in coinsurance.

The insurance company paid $\underline{\qquad \qquad}$ of the hospital bill.

Molly Nairah had three x-rays taken at a total cost of $230. Under her major medical coverage, the insurance company paid 80% of the cost of X-rays after a$25 deductible fee for each x-ray.

What was the company's share of the cost of the x-rays?

Molly Nairah had three x-rays taken at a total cost of $230. Under her major medical coverage, the insurance company paid 80% of the cost of X-rays after a$25 deductible fee for each x-ray.

What was Molly's share of the cost?

Use an inequality and the five-step process to solve each problem.
Most insurance companies will replace a vehicle if an estimated repair exceeds $80 \%$ of the "blue-book" value of the vehicle. Michele's insurance company paid $\$ 8500$ for repairs to her Subaru after an accident. What can be concluded about the blue-book value of the car?

The Bahrs’ home.
Replacement value is $70,000.
80% coverage on home.
What is the amount of insurance?

An insurance company examines the driving records of $100$ policy holders. They find that $80$ of them had no accidents in the past year, $15$ had one accident, $4$ had two, and $1$ had three.

$\textbf{a.}\hspace{10pt}$ Find the mean number of accidents.

$\textbf{b.}\hspace{10pt}$ Find the median number of accidents.

$\textbf{c.}\hspace{10pt}$ Which quantity is more useful to the insurance company, the mean or the median? Explain.

Leslie has comprehensive insurance with a $500 deductible on her van. On Halloween her van is vandalized, and the damages total$1,766. Leslie submits a claim to her insurance company. How much must the insurance company pay?

Marge Torelli is a pilot. Her annual group insurance costs $4,400, and her company pays 80% of the cost. How much of the cost does Marge pay monthly?

An insurance company sells a one-year term life insurance policy to an $80$-year-old woman. The woman pays a premium of $\$1000$. If she dies within one year, the company will pay $\$20,000$ to her beneficiary. According to the U.S. Centers for Disease Control and Prevention, the probability that an $80$-year-old woman will be alive one year later is $0.9516$. Let $X$ be the profit made by the insurance company. Find the probability distribution and the expected value of the profit.