At Richardson Manufacturing Company, there are two factors that determine the cost of health care. If an employee makes less than $55,000 per year, he pays $40 per month for individual coverage and $85 per month for family coverage. If an employee makes at least $55,000 per year, individual coverage is $70 per month and family coverage is $165 per month.
a. Arielle is an office assistant at Richardson. She makes $47,700 per year. She has individual health care. Her yearly contribution is 5% of the total cost. How much does her employer contribute?
b. Catherine is a department manager at Richardson. Her annual salary is $68,300. She has family health care. Her employer contributes $935 per month towards her total coverage cost. What percent does Catherine contribute toward the total coverage?
The correct answer and explanation is :
Part (a)
Arielle’s annual salary is $47,700. Since her salary is less than $55,000, the cost of her individual health care is $40 per month.
- Cost of individual coverage per month: $40
- Yearly cost of individual coverage: $40 × 12 = $480
Arielle contributes 5% of the total cost of her health care. This means:
- Arielle’s contribution: 5% of $480 = 0.05 × $480 = $24
To find out how much her employer contributes, we subtract Arielle’s contribution from the total yearly cost:
- Employer’s contribution: $480 – $24 = $456
Thus, Arielle’s employer contributes $456 toward her health care costs annually.
Part (b)
Catherine’s annual salary is $68,300. Since her salary is more than $55,000, the cost of her family health care is $165 per month.
- Cost of family coverage per month: $165
- Yearly cost of family coverage: $165 × 12 = $1,980
Catherine’s employer contributes $935 per month toward the total cost of her coverage.
- Employer’s yearly contribution: $935 × 12 = $11,220
To determine Catherine’s contribution, we subtract her employer’s yearly contribution from the total yearly cost:
- Catherine’s yearly contribution: $1,980 – $11,220 = $1,980 – $11,220 = $1045
To find the percentage that Catherine contributes, we divide her yearly contribution by the total yearly cost and multiply by 100:
- Percentage contribution by Catherine:
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\frac{1,980- year basis for Catherine as health plan year is 190