A group of 100 people seek out an insurance company to underwrite health insurance for its members. If expected medical spending for the group is $150,000, what will the average premium be if the health insurance company estimates the premium adding net loading costs of 20 percent?

Question

Quizplus · Accepted Answer

The average premium is calculated by adding the net loading costs to the expected medical spending. The expected spending is $150,000, and the loading cost is 20% of that, which is $30,000. Therefore, the total cost is $180,000. Dividing this by 100 people gives an average premium of $1,800 per person.

A Group of 100 People Seek Out an Insurance Company