PFIN 5th Edition by Randall Billingsley,Lawrence Gitman,Michael Joehnk

Exercise 1

Choosing a health insurance plan. Dennis and Heidi Mcnair have two children, a six-year-old and a five-month old. Their younger child, Tyler, was born with a congenital heart defect that will require several major surgeries in the next few years to correct fully. Dennis is employed as a salesperson for a major pharmaceutical firm, and Heidi is a stay-at-home mother. Dennis' employer offers employees a choice between two health benefit plans:
• An indemnity plan that allows the McNairs to choose health services from a wide range of doctors and hospitals. The plan pays 80 percent of all medical costs, and the McNairs are responsible for the other 20 percent. There's a deductible of $500 per person. Dennis's employer will pay 100 percent of the cost of this plan for Dennis, but the McNairs will be responsible for paying $380 a month to cover Heidi and the children under this plan.
• A group HMO. If the McNairs choose this plan, the company still pays 100 percent of the plan's cost for Dennis, but insurance for Heidi and the children will cost $295 a month. They'll also have to make a $20 co-payment for any doctor's office visits and prescription drugs. They will be restricted to using the HMO's doctors and hospital for medical services.
Which plan would you recommend that the McNairs choose? Why? What other health coverage options should they consider?