Okay let me first see what the argument over here has to say - Health insurance rates have been STEADILY INCREASING in this country FOR DECADES. Ok so for the past ten years, health insurance rates have been increasing. THOUGH, HIC paid for a SMALLER PERCENTAGE ( aah percentage...now percentage critical reasoning is fun..need to keep "smaller percentage in mind") of claims LAST YEAR than did ten years ago, (LAST YEAR<TEN YEARS ---> % of claims paid) The OVERALL RISE in the NUMBER of claims still means that MORE MONEY is being PAID out and the companies COMPENSATE for this by HIKING THEIR RATES.
This cr is an inference type has a lot to do with numbers. All the words that are capitalized are those which I have to be careful about..Now, let go one by one through each option.

A - hmm may be let me keep this aside
B - hey even this makes sense ...okay so we are discussing percentage... Last year say 30% was paid ---> this means ten years ago the % of claims paid > last yr---->so % of claims paid last year could be anywhere between 31-100% ( for simplicity purpose lets ignore the decimals)
So, 100%-30% = 70% unpaid last year and 100%-(31-100%) ..pick any number for ten years ago, result will be

% of unpaid claims ten years ago < % of unpaid claims last year.

hmm so I keep A and B as maybe

C- aah trick !!! we are speaking about percentage ..not numbers..this is definitely out..
D - twenty years ago ??? I really do not care about that.. What happened ten years ago - is what I really care about
E - no definitely out the argument doesn't even touch the topic of "profits" remotely.

hmm stuck between A and B ..B is a winner..but then A...
lemme go back to the argument ..aah "OVERALL RISE IN CLAIMS"

ok so last year, I claimed for both a tooth extraction and for an appendicitis operation..that makes it two claims from my side.
Or it could be that last year, I claimed for a tooth extraction and my friend claimed for an appendicitis operation.
So, basically from an "overall rise in number of claims" - I can't infer for sure that last year the number of people making a claim was greater than the number of people making a claim ten years ago..It could also be that this year the number of people making a claim has decreased or remained the same but the number of claims per person has increased.. Aah! Nice trick !!


Definitely A is out and B is in

Thus, B is the answer !!

Hope, my logic seems right. Let me know if you do not get it or do not agree with it.

Thanks.
Dr. Harshita.

I think we can attack it in a simpler way :
Fact - paid Claim % 2014 < paid claim % 2004 hence unpaid claim % 2014 > unpaid claim %2004
Option B

Health insurance rates have been steadily increasing in this country for decades. Though health insurance companies paid for a smaller percentage of claims last year than they did ten years ago, the overall rise in the number of claims still means that more money is being paid out, and the companies compensate for this by hiking their rates.

Ok so this is an infer question. Be happy, here you don't need to look to the answer choices in order to find the answer!

First understood the meaning of a few things here:

Rates is the insurance fee that we customers have to pay in order to be insured.

Health insurance claims can be paid or not paid, depend on the mood of the insurance company (jk, but normally when you appeal for small claims, they will try to please you )

Important point: % paid + % not paid = 100%

=> The flow: Fee increases. The percent of claim that being paid last year is less than the percent of claim being paid 10 years ago. But number of claims increases so even if % of claims we paid is less, we still fork out more money because there are too many claims! We paid more money, so we have to get it back by increases our rate!

Now we back to the stem. What can be infer here? Notice the part I summarize above: "number of claims increases so even if % of claims we paid is less, we still fork out more money because there are too many claims! We paid more money, so we have to get it back by increases our rate!", this is a complete cause-effect example in GMAT, so from it we cannot infer any other information!

We left with "The percent of claim that being paid last year is less than the percent of claim being paid 10 years ago." Using the equation: % paid + % not paid = 100%, we know if % paid is less, % not paid is more! So last year the % not paid is more than 10 years ago, so on the other hand, the % not paid 10 years ago is less than % paid last year!

This is a classic GMAT logic. Remember, it is not about how many questions you do, it is what you learn and make out of the questions you got!

In the premise the Question states that - "the overall rise in the number of claims"

Can't we infer from that option (a) fewer people made health insurance claims than was the case last year.

~~~~~~~~~

Another approach -

10 yrs ago :-

Let number of claims made = x
Number of claims paid = 15% => .15x
unpaid claims = 0.85x

Last year: -

number of claims made = y
Number of claims paid = 10% => .10y [From the Q - health insurance companies paid for a smaller percentage of claims last year than they did ten years ago]
Unpaid claims = 0.90y

Also, From the Q - [ that more money is being paid out]

or 0.10y > 0.15x
which can only be possible when y>x or from the Q - [the overall rise in the number of claims]

which means that option (a) fewer people made health insurance claims than was the case last year. should be correct.

Where am I wrong?

Its very unfortunate that this logic got correct answer. I am very confused with the way analysis is made.

Last year say 30% was paid ---> this means ten years ago the % of claims paid > last yr---->so % of claims paid last year could be anywhere between 31-100% ( for simplicity purpose lets ignore the decimals).

Is it not stating reverse of what is given? last year percentage of paid claims is SMALLER than % claims paid 10 years ago. Why is it assuming reverse? Am i missing something here?

Health insurance rates have been steadily increasing in this country for decades. Though health insurance companies paid for a smaller percentage of claims last year than they did ten years ago, the overall rise in the number of claims still means that more money is being paid out, and the companies compensate for this by hiking their rates.

we are given that health rates (premium ) is increasing , percentage no of claims settled were lower than the case in ten years ago , number of claims have risen (more money paid ) so companies increase their premiums

infer : must be true

looking at answer choices

A fewer people made health insurance claims than was the case last year. looks possible (hold )
B the percentage of health insurance claims that were unpaid was less than last year's percentage. looks possible(hold)
C more claims were not paid by insurance companies than were not paid last year. : we don't have any info about this as number of claims is not given (percentage is given)
D health insurance companies paid a greater percentage of their claims than they paid twenty years ago.:we don't have any info about this (what happened twenty years ago)
E profits made by health insurance companies were similar to profits made by health insurance companies last year.:we don't have any info about this (profits not mentioned)

considering A and B again
Now go for a condition when A can be not true : increase in number of claims doesn't always means no. of people have increased as one person can make multiple claims for various diseases :A option very cleverly does the trick of switching no of claims with the number of people so its not the correct choice

B is the correct answer

All options sound out of scope at the first glance.
The question stem is important in finding the right answer. This is a comparison between 10 years ago and last year => only B stands firm.

Health insurance rates have been steadily increasing in this country for decades. Though health insurance companies paid for a smaller percentage of claims last year than they did ten years ago, the overall rise in the number of claims still means that more money is being paid out, and the companies compensate for this by hiking their rates.

From the information above, it can be inferred that ten years ago

A fewer people made health insurance claims than was the case last year. -We just know the percentages.
B the percentage of health insurance claims that were unpaid was less than last year's percentage. -Correct.
C more claims were not paid by insurance companies than were not paid last year. -We just know the percentages.
D health insurance companies paid a greater percentage of their claims than they paid twenty years ago. -Out of scope
E profits made by health insurance companies were similar to profits made by health insurance companies last year. -Out of scope.

VERITAS PREP OFFICIAL SOLUTION:

Correct Answer: B

Explanation: The stimulus states that "...health insurance companies paid for a smaller percentage of claims last year than they did ten years ago." This means that the companies had a greater percentage of unpaid claims last year. Put another way, they had a smaller percentage of unpaid claims ten years ago, which is what choice B says.

Choice A is incorrect because the number of people making claims is never mentioned. One person can make several claims, so we cannot draw any inferences about the number of people.

C is wrong because the overall number of claims and the percentage of claims not paid were both lower ten years ago. Since they were both lower, their product (Total * Percentage) would also be lower, disproving the statement that more claims were not paid.

Answer D is incorrect because we do not have any way of knowing the difference in the percentage of claims paid for these two periods (ten years ago versus twenty years ago).

Answer E is incorrect since we already know that the companies have compensated for paying more real dollars by hiking their rates, but there are too many other factors involved in determining profit to make this comparison.
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