Assume the following group of 150 potential insured’s for he…
Assume the following group of 150 potential insured’s for health insurance: High risk group (50 potential insured’s) Expected Annual Cost of Health Care Expenditures = $3600/insured Medium risk group (50 potential insured’s) Expected Annual Cost of Health Care Expenditures = $2400/insured Low risk group (50 potential insured’s) Expected Annual Cost of Health Care Expenditures = $1200/insured Also assume that the insurer is unable to distinguish one class from another and yet the insured’s have good information regarding their particular risk. What should the insurer attempt to do to prevent this problem from occurring (assuming that they cannot require participation)? (Hint: there are actually two separate but related things they must do).