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Exercise 2: Now consider 2 health plans. Health Plan #1 has the following parameters: Premium: $100/month Deductible: $1000 Coinsurance: 10% Copay: $0 OOP max: $2500
Exercise 2: Now consider 2 health plans. Health Plan #1 has the following parameters: Premium: $100/month Deductible: $1000 Coinsurance: 10% Copay: $0 OOP max: $2500 Health Plan #2 has the following parameters: Premium: $0/month Deductible: $2000 Coinsurance: 20% Copay: $0 OOP max: $4000 2.a) Which plan is better for very low expected spending? Should risk aversion matter for plan choice as well as expected spending? 2.b) Which plan is better for very high expected spending, such as >$100,000? Challenge: Would the answer change if the GOP max in Plan #2 was 3,500? 2.c) At what level of medical spending does plan 1 become better than plan 2 from the perspective of minimizing expected out of pocket costs (including premiums)? Solve it algebraically
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