Elena applies for private insurance and resents the number of questions asked on the application. She states that since the primary contribution of insurance companies is to pool the risk of many individuals, they should care less about the characteristics of any one applicant and more about increasing the number of the patients that they insure. Furthermore, she states, when she had insurance through her employer, she hardly had to answer any questions. Use economic reasoning to explain to Elena the insurance company's behavior

Elena applies for private insurance and resents the number of questions asked on the application. She states that since the primary contribution of insurance companies is to pool the risk of many individuals, they should care less about the characteristics of any one applicant and more about increasing the number of the patients that they insure. Furthermore, she states, when she had insurance through her employer, she hardly had to answer any questions. Use economic reasoning to explain to Elena the insurance company's behavior

EBK HEALTH ECONOMICS AND POLICY

7th Edition

ISBN:9781337668279

Author:Henderson

Publisher:Henderson

Chapter7: The Market For Health Insurance

Section: Chapter Questions

Problem 11QAP

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Sarah purchased an individual medical expense insurance policy that included a $250 deductible and an 80-20 coinsurance provision. She required medical care and the cost of the care provided was $40,750. How much of this amount must Sarah pay and how much will her insurer pay? How would your answer change if Sarah's policy included a $3,000 out-of- pocket limit that applied to coinsurance payments? . HINT (Coinsurance is calculated after you pay your deductible)
Economics Use the following information to determine the costs to you and/or to the insurance company for the following occurrences:1) You have $500 per person Wellness Benefit.2) You have a $500 İndividual Deductible and your family (spouse and children) has a $500 Family Deductible.3) You have a $10,000 annual Maximum Family Out-of- Pocket expense provision.4) Once you have met your Individual or Family Deductible, your insurance will pay 80% of the expenses and you will pay 20% as your co-pay.Unless the occurrence is a Wellness expense, you and/or your family have to meet their deductibles first before insurance will pay anything. Example:Assume that you have met your deductible, and you go to the Emergency Room for a large cut on your shin which required cleaning, 20 stitches, a tetanus shot, and antibiotics. (80/20 plan)Total Charges = $2,500 totalYour Responsibility = $2,500*.20 = $500 (goes toward your Max Out of Pocket)Insurance Responsibility = $2,500*.80 = $2,000 Question:…
It was felt that liability insurance would undermine the tort system, which has as its central theorem the concept that the individual responsible for injuring another should be made to pay for that injury. Do you think the existence of liability insurance causes one to be less careful than he or she might otherwise be?
It was taught that liability insurance would undermine the tort system, which has as its central theorem the concept that the individual responsible for injuring another should be made to pay for that injury. Do you think the existence of liability insurance causes one to be less careful than he or she might otherwise be?
In September 2020, Ms. Sarah arranged health insurance. In 2021, Ms. Sarah made a claim for the costs of an MRI and a cortisone injection, because she had a cyst on the left side of her spine. The insurer requested Sarah's medical notes and found she hadn’t disclosed 2 previous spinal injuries from 2013 and 2016. Ms. Sarah didn't inform her insurance company the full details of her medical history and she said that she wasn't aware that she has to disclose her health situation to the insurance company. Therefore, she Made a claim to her insurance company to cover these bills. Required: Determine whether she can claim the hospital expenses under her insurance policy? And justify your answer with reasonable justifications?
Suppose that there are 2 types of plans available to you. Plan A has a deductible of $500, with 10 percent co-insurance rate for many health care services. Plan B has a deductible fo $1000, with 35 percent co-insurance rate. Plan A costs $200 per month in premiums while Plan B costs $80. Discuss characteristics of people who would choose Plan A versus Plan B. Assuming that both plan types exist in the market, who would likely choose Plan B over Plan A? What plan would you choose?
Multiple Choice Adverse selection describes a situation where an individual's demand for insurance is positively correlated with the individual's risk of loss. Adverse selection occurs when someone increases their exposure to risk when insured. This can happen, for example, when a person takes more risks because someone else bears the cost of those risks. The relationship between smoking status and mortality provides a good illustration for adverse selection, especially in the case in which a life insurance company did not vary its premiums according to smoking status of its customers. To counter the effects of adverse selection, insurers may offer premiums that are proportional to a customer's risk.
The lecture mentions that diminishing marginal utility applies to the consumption of money as well as the consumption of certain food. Can you give another example where diminishing marginal utility applies? Can you think of any example where diminishing marginal utility does not apply? From utility theory, the demand for insurance depends on the level of risk aversion (i.e. how much you hate uncertainty), the cost of insurance (i.e. if it is within your willingness to pay), as well as wealth. Can you think of anything else that affects demand for insurance? One of the predictions of prospect theory is that we tend to be overly concerned with relatively small risk. Can you think of any example (besides those given in the lecture) that either speaks to this or is an exception?
During 2013, 400 people were hired for a particular job. Of the total, 300 were white and 100 were black. There were 1,200 qualified applicants for these jobs, of whom 800 were white and 400 were black. Does adverse impact exist? If adverse impact exists, what does this mean?
In the mid-1990s, the state of New Jersey revised its rules for the individual insurance market and began requiring that insurers charge the same premiums for the same coverage to all applicants. Assuming that insurers had previously used medical underwriting, which of the following is a predictable consequence of adverse selection? 1) Insurance becomes less attractive to the healthiest individuals, so fewer of them buy it 2) Insurers’ average costs of providing coverage increase because of a changing risk pool 3) The average age of those buying in the individual market goes up 4) All of the above
Life insurance companies require applicants to submit to a physical examination as proof of insurability prior to issuing standard life insurance policies. In contrast, credit card companies offer their customers a type of insurance called “credit life insurance” that pays off the credit card balance if the cardholder dies. Would you expect insurance premiums to be higher (per dollar of death benefits) on standard life or credit life policies? Explain.
Which of the following statements is FALSE regarding the concept of "adverse selection"? Multiple Choice Adverse selection describes a situation where an individual's demand for insurance is positively correlated with the individual's risk of loss. Adverse selection occurs when someone increases their exposure to risk when insured. This can happen, for example, when a person takes more risks because someone else bears the cost of those risks. The relationship between smoking status and mortality provides a good illustration for adverse selection, especially in the case in which a life insurance company did not vary its premiums according to smoking status of its customers. To counter the effects of adverse selection, insurers may offer premiums that are proportional to a customer's risk.