Question

In: Economics

Paraphrase below please! ----------------------------------------------- Matt’s university employer presented a large pool of people to the insurance...

Paraphrase below please!

-----------------------------------------------

Matt’s university employer presented a large pool of people to the insurance company. Insurance companies will insure a large pool of customers for less money than they will insure individuals for two reasons. First, employees of such a large employer are unlikely to be any less healthy, on average, than any other group of people with the same distribution of and gender. Since people are unlikely to select university employment based on their likelihood to use health insurance, the insurance company avoids the problem of adverse selection. Second, the law of large numbers predicts that the incidence of a large health insurance claim in this large population would be about what you would statistically expect in the population as a whole. In addition, a university pool is typically healthier than average population since it contains more educated and younger enrollees. Individuals or small groups, on the other hand, don’t give insurance companies this risk-pooling advantage, and individuals who seek health insurance may be doing so because of adverse selection-that is, because they know they are in poorer-than-average health. As a result, the insurance company must charge Matt a higher premium if he quits.

Solutions

Expert Solution

ans....
Matt’s university employer offered a large group of people to the insurance company so as to be insured. Insurance companies will insure a large group of customers for less money as compared to individuals because of two reasons. First, employees of such a large employer are likely to be healthy on an average as compared to any other group of people with the same distribution and gender. Meanwhile people are not likely to choose university employment which is based on their probability to use health insurance, thus the insurance company avoids the problem of hostile selection. Second, the law of large numbers forecasts that the occurrence of a large health insurance claim in this large population would be what is statistically projected in the population as a whole. In addition, a university group is usually healthier than average population as it has more educated and younger enrolees (registered people). Individuals or small groups, on the other hand, don’t give insurance companies this risk-pooling advantage I.e. risk is associated with them, and individuals who seek health insurance may be doing so for the reason that they are in poorer health-than-average health. It is for this reason; the insurance company must charge Matt a higher premium if he quits.


Related Solutions

Paraphrase below please! ----------------------------------------------- Matt’s university employer presented a large pool of people to the insurance...
Paraphrase below please! ----------------------------------------------- Matt’s university employer presented a large pool of people to the insurance company. Insurance companies will insure a large pool of customers for less money than they will insure individuals for two reasons. First, employees of such a large employer are unlikely to be any less healthy, on average, than any other group of people with the same distribution of and gender. Since people are unlikely to select university employment based on their likelihood to use...
There is an insurance pool of 1000 people. All are covered via community rating. The distribution...
There is an insurance pool of 1000 people. All are covered via community rating. The distribution of expected health care costs per person is shown in the table below. Number of people Expected health care claims 100 $0 100 $100 100 $200 100 $300 100 $400 100 $500 100 $600 100 $700 100 $800 100 $900 A. Year 1. Customers only buy insurance if their expected health care claims are higher than the premium. In the first year, 500 people...
Suppose a large employer contracts with an insurer to providehealth insurance coverage or workers’ compensation...
Suppose a large employer contracts with an insurer to provide health insurance coverage or workers’ compensation coverage for its employees. The employer (the insured) really self-insures, and the insurer is a third party administrator. Any benefits paid by the insurer to the employees is reimbursed by the employer. The employer may buy excess coverage, such as coverage for annual health benefits exceeding $10 million. The insurer and the employer can negotiate the premium for the policy at very low transaction...
Paraphrase below please! ----------------------------------------------- Many of the changes in the welfare system have already reduced and...
Paraphrase below please! ----------------------------------------------- Many of the changes in the welfare system have already reduced and may continue to reduce the number of people receiving welfare. For example, under the current reforms, states receive block grants from the federal government to help finance their welfare programs.   This system allows states to save money if they spend less in benefits: reducing benefits does not reduce the amount of federal money they receive. Time limits will also, by definition, reduce the number...
Question 10 An insurance company initially is insuring a pool of 200 people, each of whom...
Question 10 An insurance company initially is insuring a pool of 200 people, each of whom has a 5% chance of a $10,000 loss due to illness. (III.) The insurer needs to charge a premium to each of the 200 people that is enough to fully cover the expected loss per person, plus an additional 8% “loading cost” to each person to cover all its operating expenses and generate a profit. How much does the premium per person have to...
Is a large employer likely to stop offering health insurance toits employees and simply pay...
Is a large employer likely to stop offering health insurance to its employees and simply pay the fine for not doing so? Why?
Explain briefly the below products of cloud platform, Please make sure to paraphrase the words on...
Explain briefly the below products of cloud platform, Please make sure to paraphrase the words on your own words. - Security, Identity and Compliance - Internet of things - Machine learning - Mobile services - Developer tools - Cloud storage - Networking - Blockchain - Databases
can You please paraphrase the below paragraph and write it according to Your own words and...
can You please paraphrase the below paragraph and write it according to Your own words and in a very simple way. Also, i want You to add more information in it and relate it do the dental hyegen the below theory is about Reasoned Action The attitudes are based upon beliefs and evaluations. Hence these are person's own beliefs as said above. Let us take e.g. of improving health hence person's own knowledge of nutrition, risk factors, his belief on...
Please Answer All of Them Please ! 1. Presented below is the stockholders' equity section of...
Please Answer All of Them Please ! 1. Presented below is the stockholders' equity section of Coronado Industries at December 31, 2020: Common stock, par value $20; authorized 75,000 shares; issued and outstanding 46000 shares $ 920000 Paid-in capital in excess of par value 353000 Retained earnings 508000 $1781000 During 2021, the following transactions occurred relating to stockholders' equity: 2900 shares were reacquired at $28 per share. 3400 shares were reacquired at $35 per share. 1700 shares of treasury stock...
Suppose the data below​ represent, in​ thousands, the type of health insurance coverage of people by...
Suppose the data below​ represent, in​ thousands, the type of health insurance coverage of people by age. Determine P(<18 years old) and P(<18 years old | no health insurance). Are the events "<18 years old" and " no health insurance" independent? <18 18-44 45-64 >64 Total Private health insurance 41,914 77,138 55,453 29,301 203,806 `Government health Insurance 22,990 14,949 13,984 33,980 85,903 No health insurance 6,091 27,308 12,492 574 46,465 Total 70,995 119,395 81,929 63,855 336,174 (Round to three decimal...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT