This question was discussed in detail during the December 2020 episode of the BIF Bites podcast!

Todd has an unlimited major medical policy with a \$350 deductible and 80/20 coinsurance to a \$5,000 stop-loss. Todd has a claim of \$10,000. How much must he pay out-of-pocket?

1. \$1,000
2. \$1,350
3. \$4,000
4. \$4,650

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Correct answer: B. \$1,350

Instructor insight:

The total claim is \$10,000. This brings the policy over the stop-loss limit. The payments from the Insured and Insurer can be determined as follows:

 Todd Pays Insurer Pays Deductible \$350 0 Coinsurance to stop-loss limit \$1,000 (20% of \$5,000) \$4,000 (80% of \$5,000) Above stop-loss limit \$0 \$4,650 Total \$1,350 \$8,650

To double check the calculation add the amount paid by Todd (\$1,350) to the amount paid by the Insurance Company (\$8,650), then subtract the total claim (\$10,000). If the amount equals \$0, the calculation is correct.

\$1,350 + \$8,650 - \$10,000 = 0

CFP® Exam tip:

The CFP® Exam often tests concepts and definitions at the level of application by presenting a real-life scenario. Health Insurance coverage provisions are commonly tested in this manner. Specifically, CFP® Board may present a scenario in which the Health Insurance policy benefits will be accessed and ask the candidate to calculate the amounts paid by the insured and/or insurer. To do so with precision you must first have a clear understanding of the core policy provisions and definitions (i.e., deductible, coinsurance provision, stop-loss, and maximum-out-of-pocket).

Topics: Practice Questions