Look at slide 29. How would you calculate total cost of the health care plan? Ho

Question

Look at slide 29. How would you calculate total cost of the health care plan? How do you find cost per person? It’s cheaper when everyone is included in the plan, Why?

(Edenville problem answers) 1. The total medical expenses in Edenville for the year are equal to $220,000 ($20,ooo for the relatively healthy group and $200,0oo for the sick group). If each person contributes the same amount, the premium will equal $2,200 per person. 2. If the 20 healthy people leave the pool, the $220,00o in medical costs must be paid by the remaining 80 people. The premium per person would therefore equal $2,750. 3. If only the 40 sick people are left in the program, the health care insurance premium will be equal to $5,00o.

Explanation / Answer

1) Total cost of health care plan is given $220,000

2) The Premium cost is given $2200

3) As per the given data, if anybody will be exempted then cost will be increased(as per 2nd and 3rd point). So it will be cheaper when everyone is included in the plan.

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