The problem of adverse selection in health insurance leads to a situation in which:
A) health insurance covers inappropriate items for the population it serves.
B) overinsurance of the premium-paying population occurs.
C) underinsurance of the premium-paying population occurs.
D) the percentage of the premium-paying population that is healthy rises, squeezing unhealthy individuals out of the market.
E) the percentage of the premium-paying population that is unhealthy rises, squeezing healthy individuals out of the market.

Question

Quizplus · Accepted Answer

Adverse selection in health insurance occurs when individuals who anticipate needing more medical care are more likely to buy insurance, leading to a higher percentage of unhealthy individuals in the insured pool. This can increase costs for insurers and may result in higher premiums, potentially driving healthier individuals out of the market.

The Problem of Adverse Selection in Health Insurance Leads to a Situation