A group of 25,000 employees participate in a group health plan offered by their employer. It is expected that 375 of them will need a total knee replacement in the coming year at a cost of $50,000 per procedure. What is the expected medical spending of the group?

Now suppose that some of these workers are willing to pay 25% more than they “expect” to pay in medical costs just for the security of an insurance policy. What premium are these workers willing to pay?

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