The insurance market consists of high-risk patients, who average $50,000 in spending per year, and low-risk...
The insurance market consists of high-risk patients, who average $50,000 in spending per year, and low-risk patients, who average $500 per year. Low-risk patients represent 90 percent of the population. What would average spending be?
Homework Answers
ANSWER:
% of high risk patients = 100% - % low risk patients = 100% - 10% = 90%
Average spending = high risk patient spending * % of high risk patients + low risk patient spending * % of low risk patients
Average spending = $50,000 * 10% + $500 * 90%
Average spending = $5,000 + $450
Average spending = $5,450
so the average spending is $5,450.
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