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Assume a pool of 10 people in an insurance pool (a group of people insured through community rating). It is estimated that a small number

Assume a pool of 10 people in an insurance pool (a group of people insured through community rating). It is estimated that a small number in the pool will have significant pre-existing conditions as indicated in the table.

Based on the age of these 10 people, the insurance company estimates the following distribution of health care claims (which includes necessary profit and administrative costs of the insurance company).

If there is one common premium for those in the insurance pool what would it be?

Number of Insured Anticipated Heath Costs/Year/Person
3 $1,400
2 $1,500
3 $1,600
2 $1,700
a.

$1,540

b.

$1,550

c.

$1,620

d.

$1,650

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