Group insurance plans insure a large number of people under the terms of:

In group insurance: (select one or more)a.Each individual gets a policyb.Risk is spread on the whole group, hence lower risk and accordingly lower premiumc.Only members who belong to the group and actively at work are covered

How can policyholders reduce their premium amounts in health insurance?Opting for higher sum insuredChoosing a longer policy termIncluding more family members in the policyOpting for a higher deductible

There is an insurance company and three customers, Alice, Bob and John. The timing is as follows.(1) The insurance company announces the premium and excess of a health insurance policy.(2) At Date 1, each customer decides whether to purchase the health insurance policy.(3) At Date 2, each customer will discover their health status, which is either G (healthy) or B (needing treatment inhospital).(4) Nothing happens if a customer is healthy. If a customer needs treatment in hospital, then they pay $10,000 if theydo not hold a health insurance or the excess of the policy if they do. They are cured after treatment in hospital.For simplicity, assume that the insurance company is a monopolist.Each customer has the following utility index: 𝑢(−𝑥1) + 11.02 𝑢(−𝑥2), where 𝑥𝑡 is the payment (either to the insurancecompany or to the hospital) at Date 𝑡 and 𝑢(−𝑥) = 40000√1 − (𝑥∕20000) − 40000. Table 1 summarizes each customer’sage and probability of remaining healthy.Name Age Probability of GAlice 25 99.5%Bob 25 98%John 60 95%(a) First, assume that the insurnace company offers the policy with premium $210 and excess $750. Who would like tobuy this policy? (You should find that Bob and John would like to buy the policy.)(b) David is also 25 years old and will remain healthy with probability 98% at Date 2. Unlike Bob, David’s utility indexis −𝑥1 + 11.02 (−𝑥2). Show that David does not want to buy the insurance policy in (a).(c) Note that David and Bob are equally healthy, what makes one buy the insurance policy and the other does not?(d) Next, assume that the insurance company offers the policy with premium $530 and excess $500. Who would like tobuy this policy?(e) From the insurance company’s perspective, describe the potential problem of selling only one of the two policies in(a) and (d)

There are Public health insurance plans for a vulnerable groups, Medicare and Medicaid.Fill the spaces below with the correct one either: Medicare or Medicaid.

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