Principles of Risk Management and Insurance, 13th Edition

Application Questions

1. 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 ...