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A health insurance company designs a new plan for a large, diverse population. The company calculates the average annual healthcare cost for this population to be $5,000 and sets the annual premium at $5,200 for every applicant to cover costs and make a small profit. After one year, the company finds that the average cost per insured person was actually $8,000, leading to a significant loss. Which of the following is the most fundamental reason for this discrepancy?
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