Health insurance reform is one of the most important issues in the United States. It’s also one of the most contentious. Years after Congress passed the Affordable Care Act, feelings are still heated.

In this lesson, students use percents and expected value to understand how health insurance works. Students explore the issue from the perspective of both consumer and insurance company, and learn about everything from the denial of insurance due to pre-existing conditions to the individual mandate.

### Students will

• Understand that expected value is a way to determine how much a warranty, including insurance, is worth
• Understand that the expected value is based on the cost of surgery, and the likelihood of needing it
• Understand that customers expect to save money by having insurance, while companies expect to spend
• Given four people’s probabilities, calculate how much the insurance company expects to spend on surgery
• Calculate how much insurance would have to cost for the company to break-even
• At this price, determine who would and would not choose to purchase insurance
• Evaluate the effect of various options, including the denial of coverage based on pre-existing conditions and an individual requirement (mandate) to purchase insurance

### Before you begin

Students should be able to calculate percents of numbers, e.g. 16% of \$40,000 = 0.16(40,000) = 6,400. They should also understand that a probability describes how likely something is to happen, but does not guarantee that it will.