Required information [The following information applies to the questions displayed below.] VIP-MD is a health maintenance organization (HMO) located in North Carolina. Unlike the traditional fee-for-service model that determines the payment according to the actual services used or costs incurred, VIP-MD receives a fixed, prepaid amount from subscribers. The per member, per month rate (PMPM) is determined by estimating the health care cost per enrollee within a geographic location. The average health care coverage in North Carolina costs $368 per month, which is the same amount irrespective of the subscriber's age. Because individuals are demanding quality care at reasonable rates, VIP-MD must contain its costs to remain competitive. A major competitor, National Physicians, entered the North Carolina market early in the current year with a monthly premium of $325. VIP-MD wants to maintain its current market penetration and hopes to increase its enrollees in the current year. The latest data on the number of enrollees and the associated costs follow: Age 1 to 4 5 to 14 15 to 19 20 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 74 Enrollment in Current Year 45,688 82,456 95,873 66,246 133,496 166,876 85,496 99,624 156 200 Projected Enrollment Average Monthly Cost in Current Year Next Year 48,977 84,663 95,887 67,882 132,554 175,446 90,889 101,923 $ 11,147,872 10,059,632 8,436,824 9,539,424 26,432,208 38,882,108 22,741,936 28,691,712 40 510 144