# Self-insurance of employees

Adams College has a self-insured employee health care plan. Each employee pays a monthly premium of $100. Adams pays the rest of the health care costs. The number of covered employees is 1,000 this year. Each year, the number of employees who have major health claims follows a continuous uniform distribution between 10% and 15%, and the number of employees who have minor health claims follows a continuous uniform distribution between 60% and 65%. The rest have no health claims. Round off all numbers of claims to integers.

For this year, major health claims are expected to follow a normal distribution, with a mean of $5,000 and a standard deviation of $1,000. Minor health claims are expected to follow a normal distribution, with a mean of $1,500 and a standard deviation of $300. For purposes of simulating this model, assume that every minor health claim is the same amount simulated above. Assume likewise for major health clams. Use N replications of a simulation model to answer each of the following questions.

(a) What is the probability that Adams College’s total out-of-pocket cost will exceed $300,000 this year? (b) The number of employees from year to year follows a continuous uniform distribution between a 3% decrease and a 4% increase. Round off all numbers of employees to integers. Also, due to rising health costs, the mean of minor health claims is expected to rise in a discrete uniform manner between 2% and 5% each year, and the mean of major health claims is expected to rise in a discrete uniform manner between 4% and 7% each year. What is the probability that Adams College’s total out-ofpocket cost will exceed $2,000,000 over the next five years?

### Save your time - order a paper!

Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines

Order Paper Now