Max, age 28, is insured under an individual medical expense policy that is part of a preferred provider organization (PPO) network. The policy has a calendar- year deductible of $1,000, 75/25 percent coinsurance, and an annual out-of-pocket limit of $2,000. Max recently had outpatient arthroscopic surgery on his knee, which he injured in a skiing accident. The surgery was performed in an outpatient surgical center. Max incurred the following medical expenses. (Assume that the charges shown are the charges approved by Max s insurer and that all providers are in the PPO network.) Outpatient X-rays and diagnostic tests................................................ $800 Covered charges in the surgical center ................................................ $12,000 Surgeon s fee.............................................................................. $3,000 Outpatient prescription drugs............................................................ $400 Physical therapy expenses ............................................................... $1,200 In addition, Max could not work for 2 weeks and lost $2,000 in earnings. a. Based on the given information, how much of the expenses will be paid by the insurance company? b. How much of the expenses will Max have to pay? Explain your answer. c. Assume that a surgeon who is not in the PPO network actually performed the surgery. Will Mark s policy cover this fee? Explain your answer.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Max, age 28, is insured under an individual medical expense policy that is part of a preferred provider organization (PPO) network. The policy has a calendar- year deductible of $1,000, 75/25 percent coinsurance, and an annual out-of-pocket limit of $2,000. Max recently had outpatient arthroscopic surgery on his knee, which he injured in a skiing accident. The surgery was performed in an outpatient surgical center. Max incurred the following medical expenses. (Assume that the charges shown are the charges approved by Max s insurer and that all providers are in the PPO network.) Outpatient X-rays and diagnostic tests................................................ $800 Covered charges in the surgical center ................................................ $12,000 Surgeon s fee.............................................................................. $3,000 Outpatient prescription drugs............................................................ $400 Physical therapy expenses ............................................................... $1,200 In addition, Max could not work for 2 weeks and lost $2,000 in earnings. a. Based on the given information, how much of the expenses will be paid by the insurance company? b. How much of the expenses will Max have to pay? Explain your answer. c. Assume that a surgeon who is not in the PPO network actually performed the surgery. Will Mark s policy cover this fee? Explain your answer.
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