Final answer:
Insurance companies tend to offer policies with high copays to young, healthy individuals who are unlikely to need frequent medical services. In contrast, older or risk-averse individuals with higher expected healthcare costs are generally offered policies with higher premiums and lower copays. Actuarially fair pricing is designed to match premium levels to the risk profile of the insured.
Step-by-step explanation:
To determine which sorts of customers an insurance company would offer a policy with a high copay or a high premium with a lower copay, it is important to understand how insurance companies assess risk and align their pricing strategies. A plan with a high copay means that the insured will pay a larger amount out-of-pocket each time they use medical services. This type of policy is generally offered to young, healthy individuals who are expected to use healthcare services less frequently, thus they can afford higher copays when they do need care.
Conversely, a plan with a higher premium but lower copay is designed for individuals who anticipate needing healthcare frequently or who wish to minimize out-of-pocket expenses when they seek care. These plans are commonly offered to older, risk-averse individuals or those with known health issues. The higher premiums help to offset the higher expected costs of these policyholders' medical care.
Actuarially fair insurance pricing is when a premium reflects the risk associated with insuring a particular individual or group. High-risk individuals, like those with chronic health conditions or elderly clients, would face higher premiums. Since these groups have higher expected health care costs, the insurance company charges more to ensure that the coverage remains economically viable.