Final answer:
D) A partial premium refund
In a participation plan, the insured may be eligible for a partial premium refund. This is typically the case with participating policies, which return a part of the premiums to the insured based on the insurer's financial performance. Coinsurance is a concept in which the insured pays a portion of the cost and the insurance company pays the rest.
Step-by-step explanation:
In a participation plan, the insured may be eligible for a partial premium refund. This happens when an insurance company operates on a participating basis where it may return a portion of the premium to the insured if the company's financial performance is better than needed to pay for the insurance and expenses. Policies that offer dividends to policyholders are often called participating policies, and these dividends can be taken in various forms, including cash, to reduce future premiums, or to increase the policy's death benefit.
When it comes to Part B of the Medicare insurance system, it is designed to cover health-care costs outside of hospital stays, including physician services, medical tests, and outpatient visits. Participants in this plan pay a monthly fee, deductibles, and coinsurance charges, where the policyholder pays a percentage of a service and the insurance company pays the remaining cost. The higher costs due to copayments or coinsurance might encourage insurance companies to offer plans with high copay or coinsurance to customers who are less likely to use a lot of medical services, while plans with high premiums but lower copays might be offered to those who require more frequent care.
If insurance companies charged an actuarially fair premium to the entire group rather than assessing each subgroup individually, they might underprice the risk for some subgroups while overpricing for others. This could lead to losses if the riskier subgroups claim more than the premiums cover, prompting the need for higher reserves or risking the solvency of the insurer.