Asked by Jeancarlos Chavarro on May 19, 2024
Verified
Insurance co-pays and deductibles are methods used by insurance companies to reduce moral hazard.
Co-pays
Fixed amounts paid by patients for healthcare services at the time of service, with the balance covered by insurance.
Deductibles
Deductibles are the amount paid out of pocket by the policyholder before an insurance provider pays any expenses.
Moral Hazard
The risk that one party to a contract can change their behavior to the detriment of the other party once the contract has been executed.
- Discriminate between the notions of adverse selection and moral hazard in relation to economic dealings.
- Identify mechanisms used to mitigate adverse selection and moral hazard in insurance markets and other scenarios.
Verified Answer
Learning Objectives
- Discriminate between the notions of adverse selection and moral hazard in relation to economic dealings.
- Identify mechanisms used to mitigate adverse selection and moral hazard in insurance markets and other scenarios.
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