Adverse selection is present in medical insurance because,as fewer families choose to purchase insurance,the cost of premiums will __________,ensuring that __________ families buy insurance.

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Adverse selection refers to a phenomenon where those who are high-risk and more likely to file claims (e.g. families with pre-existing medical conditions) are more likely to purchase insurance, while those who are low-risk (e.g. healthy families) may be less likely to purchase insurance. As a result, the cost of premiums will increase to compensate for the higher claims, which in turn makes it more expensive for low-risk families to purchase insurance. Therefore, fewer families will buy insurance, leading to a smaller insurance pool with higher-risk individuals, further increasing the cost of premiums. This cycle continues until only the highest-risk families are left in the insurance pool. Thus, the cost of premiums will increase, ensuring that fewer families buy insurance.

Adverse Selection Is Present in Medical Insurance Because,as Fewer Families