There is an insurance pool of 1000 people. All are covered via community rating. The distribution of expected health care costs per person is shown in the table below.

Number of people Expected health care claims

100 $0

100 $100

100 $200

100 $300

100 $400

100 $500

100 $600

100 $700

100 $800

100 $900

B. Year 2. Expected health care claims are accurate. The insurer wants to cover costs, so they set their year 2 premium equal to the average claim for people who were covered in the prior year. What is the new premium? Explain.

C. How many people buy insurance at the new Year 2 premium? Explain.

D. Year 3. Based on premium setting rules above, what is the Year 3 premium?

E. How many people buy insurance at the new Year 3 premium? Explain.

F. Year 4. What is the Year 4 premium?

G. How many people by insurance at the new Year 4 premium. Explain