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 net loading cost is 20% of the expected medical spending: 
20% x $150,000 = $30,000

Therefore, the total cost of underwriting health insurance for the group is: 
$150,000 + $30,000 = $180,000

To calculate the average premium, we divide the total cost by the number of people in the group: 
$180,000 ÷ 100 = $1,800

Therefore, the average premium will be $1,800. Answer choice C is correct.

A Group of 100 People Seek Out an Insurance Company