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When managing a health insurance plan for a group, the insurer's administrative cost for each insured person

Rationale

Is less than the cost if each member was individually insured.

When managing a health insurance plan for a group, the insurer benefits from economies of scale by spreading administrative costs across multiple insured individuals. This aggregation reduces the average cost per person compared to managing individual insurance policies.

B (equals the cost of insuring each member individually.) YOUR ANSWER

This option is incorrect because the administrative cost for each insured person in a group setting is typically lower than the cost of individually insuring each member. Group insurance allows for streamlined processes, shared resources, and standardized procedures, leading to cost savings for the insurer.

C (is more than the cost if each member was individually insured.) YOUR ANSWER

In practice, the administrative cost per insured person in a group health insurance plan is generally lower than if each member were individually insured. By consolidating administrative tasks and leveraging group dynamics, insurers can achieve efficiency and reduce overall costs.

D (varies among all group members.) YOUR ANSWER

While individual health insurance premiums may vary based on factors like age, health status, and coverage levels, the administrative cost per insured person in a group setting is typically standardized across all members. The pooling of resources and centralized management contribute to the uniformity of administrative expenses within the group.

Conclusion

Managing a health insurance plan for a group offers cost advantages in administrative operations, as the insurer can spread fixed costs over a larger pool of insured individuals. This results in a lower average administrative cost per person compared to insuring each member individually, illustrating the financial benefits of group insurance arrangements.

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