ECON 3523 Health Economics Homework #3 Due: Monday, October 10, 2022 (In Class) Name: OUID: 1. Suppose that Nathan and Mia work for the same employer, but they choose different medical plans based on their needs. Use the following examples to calculate their cost-sharing expenses (deductible, coinsurance, total out-of-pocket expenses, and percentage of expenses). Nathan's type 2 Diabetes (a year of routine in-network care of a well-controlled condition). Overall deductible: $1,500 Coinsurance: 10% Out-of-pocket Maximum: $5000 Mia's Simple Fracture (in-network emergency room visit and follow-up care) Overall deductible: $3,000 Coinsurance: 15% Out-of-pocket Maximum: $6000 $2,000 Plan details Total example cost $8,000 In this example, Nathan would pay: Mia would pay: (1) Deductibles (2) Coinsurance amount (3) Total out-of-pocket (OOP) expenses (4) Percentage of OOP expenses to total costs 2. Suppose that rather than flipping a coin, one rolls a die. If the value is 1, 2, 3, or 4, the player wins $1. If it is 5 or 6, the player loses $1. How much would a risk-neutral player be willing to pay to play the game? 3. An actuarially fair insurance contract means that the expected payout (i.c., probability of sickness payout) from the plan is exactly equal to the premium. Consider an insurance company that offers a contract with the premium r- $100 and payout q-$500 to anyone who will purchase it. (1) Peter has healthy-state income I-$500 and sick-state income Is $0. He has probability of illness p 0.1. Is the standard contract actuarially fair for Peter? If he ends up getting sick, what will his final income be