Problem

Using Exercise 16.20, sketch the effects in parts…

02:18

Problem 22 Hard Difficulty

To what sorts of customers would an insurance company offer a policy with a high copay? What about
a high premium with a lower copay?

Answer

Copayment is the small amount that customer has to pay at time of loss, while the rest amount is
covered by insurance company. Insurance company would prefer to offer policy with high
copayment who have habit or history of taking multiple claims from the insurance company.
While they will like to collect high premium with low copayment from the insured who has low
claims history because the risk of claim loss is less with such clients.

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Principles of Microeconomics for AP® Courses

Chapter 16

Information, Risk, and Insurance

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Watch More Solved Questions in Chapter 16

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Problem 16

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Problem 21

Problem 22

Problem 23

Problem 24

Video Transcript

everyone. Today we're solving problem number 22 from Chapter 16 of the textbooks, which is a critical thinking question asking us, um, to which policy are who? Which types of customers. We need a policy with higher co pay and then which would need higher premium of local cope. It, essentially the insurance companies for health care. What kind of plan? What they offered to what kind of people Let's read this little section from your trucks book. It says. If their insurance rooms are set at actuarially fare levels so that people end up paying an amount that accurate flex their risk group, certain people end up in consider amount. For example, if health insurance companies were trying to cover people already have a chronic disease like AIDS or who are elderly, they would charge these groups with very high premiums for health insurance because they're expected. Health care costs are quite hot, So those who are going to get a high premium are going to be people who need to very regularly go visit the doctor because they don't wanna have to pay on that high calmate copayment every time. So typically you have higher co payments with lower premiums, um, and deductibles. And then with higher premium health care plans, you have lower copays and lower deductibles. So, um, for high premium health care plan, they mentioned people who have chronic diseases. So customers with chronic diseases like AIDS, we're gonna want to probably get a high premium health man the elderly, because you know their life is most at risk. Chronic diseases. The elderly, um, pregnant women, because you know that that pregnancy it lost nine months. That's a substantial amount of time for women to have a plan with higher premiums. Is there going to be making visits quite often, Our new women? Um, I'll really pretty much, you know, if you have, like, a big issue like a big surgery like athletes have Tommy John surgery a lot of times that requires a lot of monitoring from a clinician or Dr Big Surgeries. Those who have big surgeries. We need thio. Is anything really big, I'd say, versus those who will go for the higher Coleman will pit tend to have a lower premiums, and these kinds of people are pretty healthy, but they may get frequent, you know, regular check ups like your annual physical things like that. Um, so frequent checkups, but obviously not preparing for, like a chronic disease, maybe minor diseases. Um, like if you have a sore throat that you know something that doesn't need to be monitored by a doctor too often so those with minor diseases can also get higher copays again. Think high premium probably means lower copays and lower deductibles versus higher copayments and higher deductibles means Lower Creek. And obviously with the lower premium, it's just how it sounds. Your health care friend offered by the insurance company will be for you frequent visits, um, regular check ups and Mayan diseases. That's too big for people who are in good shape. Um, where is higher premiums are Five people are chronic diseases, pregnant women, the elderly and those who really need big surgeries. For so she like athletes who got hurt and have a very bad injury. They may want higher premiums. So there you have it. If you guys enjoyed my video explanation of this problem, please the light. But in next to it. I hope you all have a nice day. And thank you for watching

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