Suppose that individuals have private information about the likely risk of going into a nursing home.This will directly cause:

Question

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Private information about the likely risk of going into a nursing home will cause adverse selection in the market for long-term care insurance. Individuals with higher risks of needing care may be more likely to purchase insurance, driving up the cost for insurers and making it difficult for lower-risk individuals to find affordable coverage.

Suppose That Individuals Have Private Information About the Likely Risk