Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose you have an insurance contract stipulating that you (the insured) have a $500 deductible. After that, insurance will cover 90% of the medical expenses
Suppose you have an insurance contract stipulating that you (the insured) have a $500 deductible. After that, insurance will cover 90% of the medical expenses incurred; you (the insured) will pay 10%. Your annual out-of-pocket maximum, as stated by the contract, is $10,000. Let's say you have not incurred any medical expenses this year (insurance cycle). Suppose further that you decide to get tested for allergies, and the total bill after your appointment is $1000. You (the insured) will pay O $900, you pay 90% of your medical bill $1000, you have not hit your out-of-pocket maximum of $10,000 O $100, you pay 10% of your medical bill $550. The first $500 you pay out of your own pocket until you hit your deductible. The remaining $500, you pay 10% of- $50.Given the information below, is there evidence of moral hazard? 2000 2001 Insured? Avg. Expenditures Insured? Avg. Expenditures Economics Professors Yes $20,000 ?? ? $20,000 Math Professors Yes $10,000 ? ? ? $7,000 No. Econ professors average expenditure didn't change between 2000 and 2001 so there is no moral hazard. Yes because in 2001 Econ professors dropped their coverage and health expenditures went down. Yes because in 2001 Math professors dropped their coverage and health expenditures did not change. No. All professors kept their health insurance so it is impossible to tell what would happen had the professors not been insured.In 2000, every professor was offered a full insurance contract with no premium. In 2001, HU charged any employee who wanted to keep health insurance the actuarially fair premium based o 2000 expenditures. This premium would be equal to _ __ and, as a result, ____ professors dropped their coverage in 2001. 2000 2001 Avg. Insured? Avg. Insured Expenditures Expenditures Economics Yes $8,000 ? ? ? $5,000 Professors Math Yes $10,000 ? ? ? $10,000 Professors $10,000; econ $18,000; econ $8,000; none $10,000; math O $9,000; econ
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started