Because people with hidden health problems are more likely to buy health insurance than are other people,which outcome is the result
A)The price of health insurance reflects the costs of a sicker-than-average person.
B)The price of health insurance is too low, relative to the socially optimal price.
C)People in average health may be encouraged to buy too much health insurance, relative to the socially optimal quantity.
D)People in higher risk may be buying too little insurance due to the higher cost.

Question

Quizplus · Accepted Answer

Health insurance companies calculate the cost of insurance based on the likelihood of an individual needing medical treatment. People with hidden health problems have a higher likelihood of needing medical treatment, and therefore are more likely to buy health insurance. This increases the overall cost of health insurance, causing the price to reflect the costs of a sicker-than-average person.

Because People with Hidden Health Problems Are More Likely to Buy