UNIVERSITY OF ILLINOIS AT URBANA-CHAMPAIGNCOLLEGE OF COMMERCE AND BUSINESS ADMINISTRATIOND E P A R T M E N T O F F I N A N C E Assignment 2Disability/Health/Dental and Other Group CoverageFinance/LIR 360Fall 2002 Due: October 11, 2002Please detach and turn in only the answer sheet for this assignment.Keep your worksheets and the remainder of the assignment for reference.An employer pays the following amounts this year for noncontributoryemployee benefits on a 42 year old employee:Health insurance (covers 90% of necessary medical expenses) $3300Dental insurance (covers 80% of eligible expenses) 150Vision coverage (covers 100% of eligible expenses up to $500)80Workers' Compensation 420Unemployment insurance 110Disability insurance (pays 60% of salary for 10 years)550Long term care insurance (pays 90% of eligible expenses)400Auto insurance 5001. How much of the above payments represent taxable income for theemployee?An unmarried employee earning of the employer described above who wasearning $15,000 a year is permanently and totally disabled as a result of anautomobile accident in late 2001. The employee receives a disability benefitof $750 per month for the entire year of 2002. In addition, the employeereceives $400 per month in Social Security benefits for the last six monthsof 2002. The employee has no other income. 2. How much of the disability benefits, the company plan and socialSecurity combined, are taxable income for the employee?3. How much of a tax credit is the employee entitled to?Eddie Edwards, born 10/10/72, and his wife Jenny Jenson, born 5/5/71, areeach employed by companies that offer health insurance to the entirefamily. Both plans include the 1991 Model Group Coordination of BenefitsProvisions (Traditional Approach) promulgated by the NAIC. Eddie's planpays 80 percent of medical expenses over a $500 per occurrence deductible.Jenny's plan pays 80 percent of medical expenses over a $200 peroccurrence deductible. They have two children, Nellie, age 4 and Telly, age2. For each situation, indicate how much each of the plans will pay.4. Nellie cuts her hand and requires stitches. The bill is $525.5. Nellie gets an infection from the stitches and has to be hospitalized fora day. The hospital bill is $1000. Combine this with the initial bill of$525 from question 4 and determine how much each plan will pay forthe entire occurrence of the cut hand.A company provides health insurance for employees on a non-contributorybasis. Coverage for an employee with dependents is contributory, with theemployee paying 15% of the total cost. The annual premiums are $3000 fora single employee and $4200 for an employee with dependents. FredFrederick currently has health insurance for himself and his entire family asdependents. His eldest son, Junior, just turned 23 and is no longerconsidered a dependent. Junior doesn't have a job and has a healthcondition that makes it hard for him to buy health insurance for himself. 6. For how long can Junior continue to purchase the company's grouphealth insurance?7. For the situation described in question 6, what is the maximum annualpremium that Junior would have to pay?8. Why did Congress deem it necessary to include the Dual-ChoiceProvision in the HMO Act of 1973?9. List two additional health insurance benefits that can be offered thatcan have the effect of lowering the cost of health care coverage for acompany that has a traditional fee-for-service health care plan.10. Your pre-med roommate is working on a term paper for a Comp II classon the topic of the health care system in the United States. You lookover the first draft and note that is full of praise, with comments suchas "the envy of the world," "incomparable" and "caring andcompassionate" scattered throughout the paper. Having a few hoursto kill, you decide to discuss this issue with your roommate. Whatposition would you take and what facts would you use to support yourposition?Finance/LIR 360 - Assignment 2Answer Sheet(List answers only. No need to show work here.)Name:_________________________Due: October 11,