4 Economics Questions
#1 What are some of the differences between medical insurance and other types of insurance like home or auto? How do these differences affect the market structure of the health industry?
#2 Suppose that a group of 300 individuals are seeking health insurance and have combined expected medical expenditures of $1,200,000 for the upcoming year. What would the actuarially priced premium be for each member of the group? If the insurance company places a 15% loading fee on each policy, how much would they charge for each policy?
#3 Suppose that a group of 100 members with combined expected medical expenditures of $900,000 join the group of 300 individuals from question 2 (400 total members). What would the actuarially priced premium be for each member of the group? What would the cost of each policy be if the insurance company includes a 15% loading fee?
#4 The Herfindahl Hirschman Index (HHI) if often used to evaluate the amount of competition in the market. A basic version of the HHI, but using the same calculation method, is the four firm concentration ratio. Suppose the top four insurance companies in your area have market shares of 30%, 23%, 18%, and 12% respectively. What is the HHI of this market? Would you classify the market as competitive or concentrated? Provide a 1-2 sentence explanation.