Here is what occurs in the following scenario: Bill has an income of $50,000 and has...

Here is what occurs in the following scenario: Bill has an income of $50,000 and has a probability of remaining healthy of 70%. If he is not healthy, Bill has the following projected medical costs that would be paid 100% by insurance: medications = $400, medical office visits = $1,600. what is the actuarially fair health insurance premium Bill should pay?

Solutions

Expert Solution

fair health insurance premium is the amount that is equal to the expected costs

fair value premium = 0.3*(400+1600) + 0.7*0 = 600

Rahul Sunny answered 2 years ago

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