Answer to Question #91631 in Microeconomics for Ida

Question

If there are 50 people in insurance pool. based on their age, the company estimated the following distribution of healthcare claims
No. of insured Anticipated health cost/year/person
5 $3300
5 $4000
5 $7000
5 $10000
If there is one common premium for those in the insurance pool what would it be? with no profit added here, what will be the average cost.

Answer 1

If there is one common premium for those in the insurance pool, then it would be not less than:

(5×$3300 + 5×$4000 + 5×$7000 + 5×$10000 + 30×0)/50 = $2430.

With no profit added here, the average cost is the same as in the first question, so it is $2430.