Asked by Joshua Najera on Jun 12, 2024
Verified
Julia is a 28-year-old nonsmoking, non-drinking female of normal weight. Because of adverse selection in health insurance,
A) she will be charged less for her premiums than people who are higher risks.
B) she is less likely to buy health insurance than the average person, because policy premiums are based on expected medical expenditures of people who are less healthy than she is.
C) when she get health insurance, she will be less likely to take care of herself.
D) she must get health insurance early in life, and is likely to lose health insurance if she smokes, drinks to excess, or gains weight.
E) she is more likely than the average person to buy health insurance, because she is more likely to be offered it.
Adverse Selection
A situation where asymmetrical information leads to the selection of poor risks by one party in a contract or agreement.
Policy Premiums
The amounts paid for insurance policies by the insured to the insurer to provide coverage for various risks.
Medical Expenditures
The total amount spent on healthcare services and products in a given period.
- Familiarize with the concept of adverse selection in the realm of health insurance and its repercussions.
Verified Answer
BA
baker almutlaqJun 13, 2024
Final Answer :
B
Explanation :
Adverse selection in health insurance refers to when individuals who are at higher risk for medical expenditures are more likely to buy health insurance, driving up premiums for everyone. As a low-risk individual, Julia is less likely to buy health insurance because she may not see it as necessary. However, if she does choose to purchase health insurance, she may end up paying higher premiums due to adverse selection.
Learning Objectives
- Familiarize with the concept of adverse selection in the realm of health insurance and its repercussions.