Jim and Stephanie just got married and are thinking about changing their health care insurance plans to be more affordable. Currently, both Jim and Stephanie are insured through their own employers. Jim's employer pays $42 \%$ of his $[tex]$378$[/tex] monthly premium. His insurance plan will also pay for $23 \%$ of the $[tex]$345$[/tex] premium for additional beneficiaries. Stephanie's employer pays $35 \%$ of her $[tex]$298$[/tex] monthly premium but offers to pay an extra $10 \%$ of her premium for each beneficiary Stephanie adds to her plan. Her employer would then pay $30 \%$ of the $[tex]$349$[/tex] premium for each additional beneficiary.
Insurance
Jim's Employer
Beneficiary
Monthly Premium
Employer Contribution
Jim
[tex]$378$[/tex]
42\%
Additional (each)
[tex]$345$[/tex]
23\%
Stephanie's Employer
Beneficiary
Monthly Premium
Employer Contribution
Stephanie
[tex]$298$[/tex]
35\% (+10\% for each additional beneficiary)
Additional (each)
[tex]$349$[/tex]
30\%
Answer (1)
Calculate Jim's individual insurance cost: $219.24. - Calculate Stephanie's individual insurance cost: $193.70.
Calculate the cost if Jim adds Stephanie to his plan: $484.89. - Calculate the cost if Stephanie adds Jim to her plan: 408.20. T h e m os t a ff or d ab l eo pt i o ni s St e p hani e ′ s in d i v i d u a lpl an : \boxed{{$193.70}}$.
Explanation
Calculate Jim's Individual Cost First, let's analyze the individual insurance costs for Jim and Stephanie. Jim's monthly premium is $378, and his employer covers 42%. Therefore, Jim's employer contribution is 0.42 × 378 = $158.76 . Jim's individual cost is the total premium minus the employer's contribution: $378 - 158.76 = $219.24.
Calculate Stephanie's Individual Cost Stephanie's monthly premium is $298, and her employer covers 35%. Therefore, Stephanie's employer contribution is 0.35 × 298 = $104.3 . Stephanie's individual cost is the total premium minus the employer's contribution: $298 - 104.3 = $193.7.
Calculate Jim Adding Stephanie Cost Now, let's consider the cost if Jim adds Stephanie to his insurance plan. The total premium would be Jim's premium plus the additional beneficiary premium: 378 + 345 = $723 . Jim's employer contributes 42% of Jim's premium and 23% of Stephanie's premium: ( 0.42 × 378 ) + ( 0.23 × 345 ) = 158.76 + 79.35 = $238.11 . Jim's total cost would be the total premium minus the employer's contribution: $723 - 238.11 = $484.89.
Calculate Stephanie Adding Jim Cost Next, let's consider the cost if Stephanie adds Jim to her insurance plan. The total premium would be Stephanie's premium plus the additional beneficiary premium: 298 + 349 = $647 . Stephanie's employer contributes 35% + 10% for adding Jim, so 45% of Stephanie's premium and 30% of Jim's premium: ( 0.45 × 298 ) + ( 0.30 × 349 ) = 134.1 + 104.7 = $238.8 . Stephanie's total cost would be the total premium minus the employer's contribution: $647 - 238.8 = $408.2.
Compare Costs and Determine Cheapest Option Finally, let's compare all the costs:
Jim alone: $219.24
Stephanie alone: $193.70
Jim adds Stephanie: $484.89
Stephanie adds Jim: $408.20
The most affordable option is Stephanie alone with a cost of $193.70.
Examples
Understanding insurance costs is crucial for financial planning. For instance, consider a family deciding between different health insurance plans. By calculating premiums, employer contributions, and out-of-pocket expenses for each plan, they can determine the most cost-effective option that meets their healthcare needs. This involves comparing individual vs. family plans, different coverage levels, and potential savings through employer contributions, ensuring they make an informed decision to optimize their healthcare spending.
