Community rating is able to redistribute funds from the healthy to the sick by.

Question

Options

• AProviding benefits in excess of premiums to those who become ill.
• BSetting premiums based on community experience, rather than that of subgroups.
• CCharging the same premium for high-risk and low-risk populations.
• DAll of the above

• A
  15% (4)
• B
  4% (1)
• C
  4% (1)
• D
  77% (20)

Explanation

All three options (A, B, and C) accurately describe distinct mechanisms through which community rating achieves cross-subsidization, which is why "All of the above" is correct. Option A captures the outcome: sick individuals receive benefits exceeding what they paid, funded by the surplus from healthier members. Option B describes the methodology: premiums reflect the entire community's average risk rather than isolated subgroup experience, preventing healthy cohorts from being rated separately at lower costs. Option C states the direct mechanism: identical premiums for high-risk and low-risk individuals force the low-risk group to implicitly subsidize the high-risk group. No option is a distractor here - each describes a different lens (outcome, method, mechanism) on the same concept.

Memory tip: Think of community rating as a "pool" - everyone swims in the same pool and pays the same entry fee (C), the fee is based on the whole pool's average depth (B), and the strongest swimmers help carry the weakest ones (A). When a question lists three true statements and offers "All of the above," check whether they describe different aspects of the same phenomenon rather than competing explanations.

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