History of Health Insurance.

Please answer TRUE OR FALSE . From question 1-10. Explain. Make sure you have correct answers

1/ Methods for Covering Risk.

The Law of Large Numbers explains why it is unlikely that the actuarially fair premium for an insurance policy will be the same for a small start up firm as it will be for a large employer such as a university.


2/ Methods for Covering Risk

Depending on assistance from family and friends to pay for oneAc€?cs unforeseen medical expenses is an example of an economic trade-off between consumption today and consumption tomorrow.

3/ History of Health Insurance

Including the tax subsidy for employer provided health insurance, the government provides about 47% of total funds for health care financing.

4/ History of Health Insurance.

The U.S. is unusual in the developed world in that it uses a general tax to fund health insurance for the elderly.

5/ Adverse Selection.

Title XVII of the Social Security Act of 1965 dealt with the problem of adverse selection in health insurance markets for elderly people.

6/ Adverse Selection & Moral Hazard

BillAc€?cs employer offers a new health insurance benefit which covers preventive and cosmetic dental services, including orthodontic care, for employees and their family members. If Bill knows his children need extensive orthodontic care, he will buy the policy. This is an example of moral hazard.

7/ Adverse Selection and Moral Hazard

BillAc€?cs health insurance covers preventive and cosmetic dental services, including orthodontic care, for employees and their family members. Bill is willing to pay $30 per month for over the counter teeth whitening strips at the local pharmacy. With his co-pay, he learns he can pay $25 per month and receive professional teeth whitening services at his dentist. He chooses to go to the dentist for the service, which costs the insurance company $75 per month. This is an example of moral hazard.

8/ Effects of Health Insurance on Labor Markets

Increasing the ratio of part time instructors to full time professors reflects one of many ways that universities attempt to reduce costs of its workforce.

9/ Adverse Selection and Moral Hazard

Bill is an aging snowboard instructor at a local ski resort. All winter, he takes over the counter pain medication to deal with his aching joints. Each summer, he moves home with his parents and takes a part time job making minimum wage and qualifies for state government subsidized health insurance. This summer, he plans to undergo arthroscopic surgery to repair his knee. Though this is an economically rational decision for Bill, it represents a welfare loss to society as a whole.

10/ Risk Aversion.Catastrophic medical expenses are large, infrequent and unpredictable. Risk aversion explains why people buy insurance which covers such catastrophic events.11/ Methods for Covering Risk
Medical cost may be paid by
A.  charity.B.  all of the above.C.  third party insurance companies.D.  shifting consumption from one period to another.E.  family or friends.
12/Methods for Covering Risk.Social insurance
A.  is useful for covering expenses related to common allergy treatments.B.  would most likely provide more extensive coverage for dementia treatments than family or private savings.C.  was first implemented in the U.K. after World War II.D.  is not found in the U.S..E.  should cover preventive dental cleaning in adults.
13/ Methods for Covering RiskA company with 1,000 employees has the following experience this year
25 hospitalizations at $5,600 each.
24 births at $10,000 each.
4.1 physician visits per employee at $60 per visit.
2.4 prescriptions filled per employee at $25 per prescription.
The actuarially fair premium
A.  is less than the load factor per employee.B.  is greater than $1000 per employee.C.  is approximately $670 per employee.D.  is the same as the load factor per employee.E.  is less than $500 per employee.
14/ Moral HazardInsurance coverage of which treatment would likely cause the most problems with moral hazard?
A.  antibiotics.B.  family counseling.C.  allergy medicine.D.  emergency room services for sprained ankle.E.  hip replacement surgery.

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