Jerry's demand curv for offic visits is Quantity = 30 - Price or Willingness to pay for the Nth visit=30-Nth Visit. Jerry has an insurance policy with a deductible of $100, a stop loss of $200, and a coinsurance rate of 50%. Suppose all doctors charge $10 per visit.
a. Explain the difference between a "stop loss" and a "deductible."
b. Draw Jerry's demand curve. Draw the Patient-Experienced Price Line.
c. If Jerry is optimizing, how many office visis will Jerry have under this policy?
d. What would be his consumer surplus from the point-of-sale perspective?
e. If Jerry pays an actuarially fair premium, what would be his consumer surplus from an overall perspective? (Note: it is not necessary to compute the premium. It is enough to know how many visits Jerry has under this insurance plan and the market price of each visit.)
f. If Jerry were uninsured and optimizing, how many office visits would he have?
g. How many more office visits did Jerry have with insurance relative to no insurance?