Assume That 50 Percent of the Population Consisting of 2,000

Multiple Choice

Assume that 50 percent of the population consisting of 2,000 low-risk people and 1,000 high-risk people choose a comprehensive health insurance plan having a break even premium of $800.The remaining 50 percent, also consisting of 2,000 low-risk people and 1,000 high-risk people, choose a Health Maintenance Organization plan having a break even premium of $400.If high-risk people submit claims worth $2,000 under the comprehensive plan and $1,000 under the HMO plan, which of the following situations will occur?

A) High-risk people will shift to the comprehensive plan resulting in an increase in its premium rate.
B) High-risk people will shift to the HMO plan resulting into a fall in its premium rate.
C) Low-risk people will shift to the comprehensive plan resulting in a substantial decrease in its premium rate.
D) Low-risk people in both groups will stick to their respective plans and minimize their losses.