Health insurance Plan

[akhp77]

Source: MGMAT CAT

Health insurance Plan A requires the insured to pay $1000 or 50% of total cost, whichever is lower. Plan B requires the insured to pay the initial $300, but then pays 80% of the cost over $300. Which of the following is a cost level for which both insurance plans pay out the same amount?

A: $600, B: $1000, C: $3800, D: $5300, E: $6200

OA: C
Initially, I did it incorrectly because I understood question wrongly.

Is the above problem obvious in meaning? Please suggest.

I predicted based on solution as follows
total cost => total cost claimed
pays 80% of the cost over $300 => pays 80% of the claimed cost over $300

Regards
Akhilesh Prasad

[tim]

Hi Akhilesh,
You’re totally overanalyzing this one. It doesn’t matter whether we are talking about total impact on the economy cost, total claim amount, or total that I make up with a random number generator. The bottom line is that the word cost shows up three times, and all three times it means the same thing. Again, it doesn’t matter in the slightest what it means, just that the meaning is consistent. This is precisely why you can replace all three with the variable x and proceed to solve from there..

[riddance.blog]

Hi,

In my opinion this question is not formulated correctly, as there is ambiguity on the following sentence:

Plan B requires the insured to pay the initial $300, but then pays 80% of the cost over $300

who pays the 80% over $300? the insured or the Plan? It's not clear enough.

Regards,
rid

[RonPurewal]

Hi,

In my opinion this question is not formulated correctly, as there is ambiguity on the following sentence:

Plan B requires the insured to pay the initial $300, but then pays 80% of the cost over $300

who pays the 80% over $300? the insured or the Plan? It's not clear enough.

Regards,
rid

interestingly, if you process this sentence in the same way that you would process an analogous sentence correction problem, you'll see that there is only one way to interpret it.

in particular, the verb "pays" is parallel to "requires", but is not parallel to "(to) pay".
therefore, it must have the same subject as "requires" -- so we know that we are talking about the plan, not the insured person.

hope that helps.

[elevinty]

are you serious?
am I going to face similar question in GMAT?
where I need to analyze what word is referring to what.
I got this question wrong for the same reason as above. I thought that the insured needs to pay 80%

[jnelson0612]

are you serious?
am I going to face similar question in GMAT?
where I need to analyze what word is referring to what.
I got this question wrong for the same reason as above. I thought that the insured needs to pay 80%

elevinty, yes, correctly analyzing what the problem is asking for is part of the quant. However, this really should not be that hard to understand.

"Plan B requires the insured to pay the initial $300, but then pays 80% of the cost over $300"

Read it exactly the way Ron described.
Plan B:
1) requires the insured to pay the initial $300
BUT THEN
2) pays 80% of the cost over $300.

Both of those refer back to Plan B.

[hemant.rao110]

so that means for getting good score in quant one must need good SC skills

[messi10]

so that means for getting good score in quant one must need good SC skills

haha! well, can't hurt your chances...

But on word translations, interpreting the question is what is being tested. Once the question has been interpreted correctly, rest of what follows is simple calculation.

[StaceyKoprince]

that is true on word questions, yes - they are also testing you on whether you can correctly translate from english to math :)

[KatyH311]

Hello,

I got this question wrong and am still confused after reading the previous posts here. I approached this from a non-algebraic approach, and working backwards from the correct answer choice (C), here is what I came up with:

If the total cost is $3800

Under Plan A:
the insurance will pay out $1000 (it pays out the lower of 1/2 cost or $1,000. In this case 1/2 cost would be $1900. $1,000 is lower than $1900, so my understanding is that the insurance would pay $1000 in this case).

Under Plan B:
The insurance will pay out 80% of 300 less than the total cost. So, $3800-300 = $3500. The insurance pays out 80% of $3500 = $2800.

So, I am confused because the amount paid out by insurance under Plan A and Plan B according to my above calculations is not equal. Can someone help me understand why the above is wrong?

[Sage Pearce-Higgins]

Watch out for the wording here! The question states that 'Health insurance Plan A requires the insured to pay $1000 or 50% of total cost, whichever is lower.' That means that the insurer will pay the rest.

[KatyH311]

Ha! I see. Thank you!

[Sage Pearce-Higgins]