Additional Problem #5: Health Insurance Contracts In Reality (Again) Assume (as in Problem Set # I) you are a consumer choosing a health insurance plan just after arriving at your new job. You are starting work on January 1, so you're purchasing an insurance contract for a full year, good through December 31 at the end of the year. You are choosing an insurance plan just for yourself, and are not covering any dependents. First, assume that the two plans you are choosing between give you army the same amen to doctor: in minim-k so you don't have to think about the providers you can access in each plan. The plans are only different nancially. The details of the two plans are: Plan 1 Plan 2 Yearly Premium: $4,200 Yearly Premium: $7,000 Yearly Deductible: $2,000 Yearly Deductible: $500 Coinsurance Rate: 30% Coinsurance Rate: 10% (post deductible spending) (post deductible spending) Out-of-Pocket Max: $8,000 Out-of-P0cket Max: $4,000 a) 13) Construct two graphs, one for each plan, that show h0w much each consumer will spend each year (premium + out-ofpocket medical spending during the year) on the j-M! as a function of total medical spending during the year (insurer + insured) on the xexir. ASSume at the beginning of the year you know that your total medical spending (insured + insurer) for the upcoming year will have one of 3 values: (i) $1,000 (ii) $4,000 and (iii) $15,000. For sec/5 of these three possible total health spending outcomes, how much will you spend as the consumer during the year (premium + out of pocket on medical spending) in Plan 1? What about in Plan 2? Now, instead of thinking about this from the perspective of an individual-consumer, think about it from the perspective of the population of employees with access to these contracts. Assume that all employee: by an immmep/an from this set of two options. Further, asSume that 50% of the population knows they will have total spending (insured +insurer) egual to $1,000 25% knows this total spending will be $4,000 and the rest (25%) know their total spending will be $15,000. (Of course, it is unrealistic that consumers know their future spending, but assume that for this problem). What percentage of consumers chooses plan 1? What percentage chooses plan 2? What are the average costs of plan 1 given those who enroll? Plan 2