Health Insurance Premiums

Health Insurance Premiums pp. 372-374

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Section ObjectiveSection ObjectiveCompute:

• health insurance premiums


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health insurance (p. 372)

Protection against the costs of medical expenses.

preferred provider organization (PPO) (p. 372)

A group of selected health care providers who offer comprehensive services at preset reimbursement levels.

Key Words to KnowKey Words to Know


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health maintenance organization (HMO) (p. 372)

A group program that provides health care at its own center with its own doctors for a fixed fee per month.

Key Words to KnowKey Words to Know


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Employee’s Percent = 100% × Employer’s Percent

Formula 1Formula 1


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Employee’s Contribution =Total Premium × Employee’s Percent

Formula 2Formula 2


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Insuring Your Life p. 372Insuring Your Life p. 372

What’s the purpose of an insurance premium?


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Sean Derricotte has a family membership in a group medical insurance program. The annual premium is $6,180. Derricotte’s employer pays 80 percent of the total cost. His contribution is deducted monthly from his paycheck.

What is Derricotte’s annual contribution?

What is his monthly deduction?

Example 1Example 1


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Find the employee’s percent.

100% – 80% = 20%

Example 1 Answer: Example 1 Answer: Step 1Step 1


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Find the employee’s annual contribution.

Total Premium × Employee’s Percent

$6,180.00 × 20% = $1,236.00



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Find the employee’s monthly deduction.

Employee’s Contribution ÷ 12

$1,236.00 ÷ 12 = $103.00



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Paul Esnerado has a family PPO group medical insurance plan. The total cost is $13,900.

His employer pays 85 percent of the total cost.

He also has the optional annual dental, which costs $950, and the optional vision care, which costs $315.

Practice 1Practice 1


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His employer pays 50 percent of dental and vision costs.

How much is deducted each week from his paycheck for medical, dental, and vision insurance combined?

Practice 1 (cont.)Practice 1 (cont.)


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$52.26

Practice 1 AnswerPractice 1 Answer


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Tim Landau is a self-employed custom furniture maker. He pays 100 percent of his family HMO annual premium of $10,200. He also has a dental plan that costs $700, and an annual vision plan that costs $260. The premiums are paid quarterly.

How much does he pay quarterly for insurance?

Practice 2Practice 2


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$2,790

Practice 2 AnswerPractice 2 Answer

Health Insurance Premiums11-1END OF SECTIONEND OF SECTION

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Health Insurance Premiums