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Senior Manager
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A family pays $800 per year for an insurance plan that pays [#permalink]
 11 Nov 2003, 10:45
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A family pays $800 per year for an insurance plan that pays 80 percent of the first $1,000 in expenses and 100 percent of all medical expenses thereafter. In any given year, the total amount paid by the family will equal the amount paid by the plan when the family's medical expenses total
A. $1,000
B. $1,200
C. $1,400
D. $1,800
E. $2,200
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shubhangi
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Manager
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B?
Family pays $1000, $800 for the plan + $200 as 20% of first 1000, up until the expense is $1000. So for the plan to match that amount, the expense has to add $200 to 80% of first $1000 expense. And that happens when the total expense reaches $1200.
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Senior Manager
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B is right.. dont u think its bit confusing?
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shubhangi
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Manager
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shubhangi wrote: B is right.. dont u think its bit confusing?
Yep, it's bit confusing at first glance but amazingly such is the fact all insurance companies rely on to make BIG BIG bucks. 
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Director
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"A family pays $800 per year for an insurance plan that pays 80 percent of the first $1,000 in expenses and 100 percent of all medical expenses thereafter. In any given year, the total amount paid by the family will equal the amount paid by the plan when the family's medical expenses total "
I take issue with the wording.
For instance, if the total expenditure is $2000, the family will be on the hook for $1000.
800+ .2(1000)= 1000. So the family's expense is $1000, which means the insurance company's expense, to be equal, would also be $1000.
The phase "when the family's medical expenses total" is ambiguous.
I presume this possible misunderstanding is why $2000 is not one of the options.
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VP
Joined: 13 Nov 2003
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family will be paying: $800 (insurance) + $200 (out of $1000) = $1000.
insurance pays: $800 (80% of $1000) + $s spent over $1000 (X)
X + 800 = 1000 ..gives $200 & this is what family spent over $1000.
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Intern
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probably writing the equations down will lessen the confusion in the problem.
premium paid by the family = 800.
If medical expense is M, amount paid by the plan = 800 + (M-1000)=M-200
excess over 'amount paid by the plan'(family will have to bear it as the company won't) = M - (M-200) = 200
Given that
premium + excess over 'amount paid by the plan' = 'amount paid by the plan'
800 + 200 = M-200
M= 1200
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