VIP-MD is a health maintenance organization (HMO) located in North Carolina. Unlike the traditional fee-for-fee service model that determines the payment according to the actual services used or costs incurred. VIP-MD receives a fixed, prepaid amount from subscribers. The per member month (PMPM) rate is determined by estimating the health care cost per enrollee within a geographic location. The average health care coverage in North Carolina costs $368 per month, which is the same amount irrespective of the subscribers age. Because individuals are demanding quality care at reasonable rates, VIP-MD must contain its costs to remain competitive. A major competitor, Doctors Nationwide, is entering the North Carolina market in early 2013 with a monthly premium of $325. VIP-MD wants to maintain its current market penetration and hopes to increase its enrollees in 2013. The latest data on the number of enrollees and the associated costs follow:

Age	Enrollment in 2013	Projected Enrollment in 2014	Average Monthly Cost in 2013
1-4	45688	48977	11147872
5-14	82456	84663	10059632
15-19	95873	95887	8436824
20-24	66246	67882	9539424
25-34	133496	132554	26432208
35-44	166876	175446	38882108
45-54	85496	90889	22741936
55-64	99624	101923	28691712
65-74	156288	161559	48918144
75-84	67895	72465	33132760
85 years and older	23499	26849	24086475
	1023437	1059094	262069095

Required:

1. Calculate the target cost required for VIP-MD to maintain its current market share and profit per enrollee in 2013.

2. Costs in the health care industry applicable to VIP-MD and Doctors Nationwide are expected to increase by 6% in the coming year, 2014. VIP-MD is planning for the year ahead and is expecting all providers, including VIP-MD and Doctors Nationwide, to increase their rates by $15, to $340. Calculate the new target cost assuming again that VIP-MD wants to maintain the same profit per enrollee as in 2013.