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?

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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