Question

You are working for a health insurance company. For the 2000 people you insure, the amount they see the doctor in a year are:

# of People	Number of visits
750	0
600	1
590	4
60	10

1. Using these figures, figure out the ‘fair premium’ if there is:

1. No co-payment or deductible and the fee is $150 per visit
2. No co-payment or deductible and the fee is $200 per visit
3. A co-payment of $10 and the fee is $200 per visit
4. A co-payment of $50 and the fee is $200 per visit
5. Annual deductible of $250 and the fee is $200 per visit

b) Now supposed there are two types of people – those without a chronic condition and those with a chronic condition. And suppose that those with a chronic condition use healthcare more than those without:

Without a chronic condition		With a chronic condition
# of People	Number of visits	# of People	Number of visits
750	0	0	0
150	1	450	1
90	4	500	4
10	10	50	10

Answer 1

a) In the first scenario a co pay of $10 and $200 per visit will be fair( that is option 3)because in 2000 people 750 not seeing doctor and 600 people only once in year so it came major number people not frequently needed doctor visit where as 590 people visits 4times a year , only 60 people are using service frequently so a minimum amount of copay and fair doctor fee is acceptable.

b.) In the first 750 people without chronic disease should have no co payments and $200 per visit will be feasible. For next 150,90 and 10 their number of visits gradually increases so co pay amount will range from $5,$10,$20 respectively and $200 per visit will be fair.

In case of people with chronic illness 450 people only visit once so their copay will be $10and $200 per visit , next 500 people visits 4 times a year their co pay will be $20 and $200 per visit. Other 50 people visits 10times then a co pay of $ 30 and $200per visit will be fair.