In this scenario, the insured has a deductible of $500, 80/20 coinsurance, and a stop-loss limit of $10,000. Under Pennsylvania accident and health insurance principles, the stop-loss limit caps the insured’s total out-of-pocket expenses, including the deductible and coinsurance payments.
The insured incurs $50,000 in covered losses. First, the insured pays the $500 deductible, leaving $49,500. With an 80/20 coinsurance arrangement, the insured would normally pay 20% of $49,500, which equals $9,900. Combined with the deductible, the total out-of-pocket cost would be $10,400.
However, the stop-loss limit restricts the insured’s total responsibility to $10,000. Once the insured reaches this limit, the insurer pays 100% of remaining covered expenses. Since $10,400 exceeds the stop-loss limit, the insured only pays $10,000. This protection is a critical consumer safeguard emphasized in Pennsylvania insurance education materials. Therefore, option C is correct.
