You could not find any insurance company to offer a health insurance with a price equal actuarially fair premium $100, due to fact that they are for-profit firm, not not-for-profit organization. Actuarially fair premium is a price that leads to zero-expected-profits of insurance company. Fortunately, you found an insurance company which will hand you an insurance benefit equal to your expected financial lose. But, the insurance company asked you to pay more than actuarially fair premium because there are other costs in order to offer the health insurance to you. The insurance company considered the administrative cost of $30 because they need to mail your monthly bill. Also the insurance company considered the risk bearing cost of $20 because they need to buy an insurance to hedge their own financial risks. For example, if your symptom is extremely serious, the medical bill would be more than $2,000. To hedge the financial risk due to such an unusual situation, the insurance company buy an insurance form another insurance company. Additionally, the insurance company needs a profit of $10.

Question 2. What would the loading cost of the insurance company be? Show how you calculated the loading cost.

Question 3. What would the selling price of the health insurance be? Show how you calculated the selling price.