FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Suppose in a given state's new insurance marketplace, with community rating and no restrictions on who can buy at the community rate, the risk pool (distribution of expected health costs) is as follows:
20% of eligible enrollees' expected health costs = $1,000 (per year)
50% of eligible enrollees' expected health costs = $2,000
10% of eligible enrollees' expected health costs = $3,000
20% of eligible enrollees' expected health costs = $6,000
What would the community premium rate for this risk pool be if we also assume 10% loading costs for the insurer to cover its admin costs.
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