Personal Finance 1st Edition by Jack R. Kapoor

Exercise 15

Comparing the Costs of a Regular Health Insurance Policy and an HMO. A health insurance policy pays 65 percent of physical therapy costs after a $200 deductible. In contrast, an HMO charges $15 per visit for physical therapy. How much would a person save with the HMO if he or she had 10 physical therapy sessions costing $50 each? (Obj. 4)

Step 1 of 5

Health insurance:

Insurance pays 65% of the physical therapy costs after $200 deduction.

HMO charges:

The per visit charges for physical therapy is $15

Number of physical therapy is 10

Each session costs $50

Total cost is first estimated by multiplying the number of physical therapy with the session costing.

Cost under the regular insurance is determined by adding the amount of deduction with the 35% of the amount available for claim.

The formula for calculating the total cost is:

Substitute the values in the formula:

The total cost is $500