Question:

Your company has recently revamped its health care insurance plan. You now have a choice of one of three plans as shown below:

Plan 1: The monthly cost is $32 and the insurer pays 90% of all expenses after you have paid the first $500 each year ($500 deductible).

Plan 2: The monthly cost is $5 and the insurer pays 90% of all expenses after you have paid the first $1200 each year ($1200 deductible).

Plan 3: The monthly cost is $24 and the insurer pays 70% of all expenses (no deductible).

You have gone back several years and examined past medical expenses and created the following probability distribution.

Required:

1. Prepare a decision table representation of this problem.
2. Prepare a decision tree diagram model of this problem.
3. Calculate the expected annual cost for each of the three plans.
4. Which plan do you recommend from a minimum cost perspective?

Price: $2.99

Solution: The downloadable solution consists of 4 pages
Deliverable: Word Document