Question 3

Insurer's administrative cost for each insured person is less when part of a group plan.

When managing a health insurance plan for a group, the insurer's administrative cost for each insured person is less than the cost if each member was individually insured.

A) Is less than the cost if each member was individually insured.

This option is correct because group insurance allows insurers to spread administrative costs across a larger number of individuals, resulting in lower costs per person compared to individual insurance, where each policy incurs its own administrative expenses.

B) equals the cost of insuring each member individually.

This option is incorrect as it suggests that the administrative costs are the same whether individuals are insured separately or as a group. In reality, administrative efficiencies achieved through group coverage lead to lower costs per member.

C) is more than the cost if each member was individually insured.

This option is incorrect because it contradicts the principles of group insurance. Group plans typically reduce administrative costs due to economies of scale, meaning the cost per individual is not more than when insured individually.

D) varies among all group members.

This option is also incorrect since the administrative costs are generally uniform across the group in a well-managed health insurance plan. While individual health risks may vary, the administrative cost per person remains lower in group plans.

Conclusion

In conclusion, option A is definitively correct as it reflects the cost efficiencies associated with group health insurance plans. All other options fail to recognize the fundamental cost advantages that group insurance provides in terms of administrative expenses, making them incorrect in the context of the question.