Suppose a particular population has two kinds of health risks, high and low. Let the expected annual health care costs for the high risk be $10,000, and for the low risk, half that.  If there are twice as many low risk as high risk individuals, and if the one insurer’s administrative load is 20%, what would the community rated premium be if everyone is compelled to and able to buy health insurance?  Note: administrative load can be construed as the amount that the insurer has in costs to run the plans above and beyond the "health care costs."

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Moral Hazard

The moral is a person's behavior towards himself /herself, society, organization, and others. Hazard is something that is happening and is not good. A person may be morally good or bad. It depends on his attitude, ethics, integrity, and values. A person may have the highest reverence for money to that for the truth. In this case, the person may lie and it is said that the person is morally bad.