Deck 8: The Market for Health Insurance

Question 1

Charged insurance premiums generally exceed the fair value of the risk that the insurance company has assumed, where the fair value is the expected payout or actuarially fair premium.

Answer 1

True

Question 2

Due to ___________________, insurance suppliers will be more willing to enter market situations where they can make a reasonable estimate of their payouts or where they can assess the degree of risk they are assuming.

Answer 2

risk aversion

Question 3

What is the term of the following definintion.
-Applies when each member of an insurance pool pays the same premium per person or per family for the same coverage.

Answer 3

Community rating

Question 4

What is the term of the following definintion.
-Occurs when insurance companies base premiums on past levels of payouts, which is often done in the case of car or homeowner's insurance.

Question 5

What is the term of the following definintion.
-Refers to the phenomenon of a person's behavior being affected by his or her insurance coverage.

Question 6

What is the term of the following definintion.
-Exists when people with different health-related characteristics than the average person increase the amount of health insurance purchased

Question 7

What is the term of the following definintion.
-A level of expenditure that must be incurred before any benefits are paid out.

Question 8

What is the term of the following definintion.
-Helps to reduce the moral hazard factor for the insured who has spent more than his or her deductible because health care is not free to the consumer.

Question 9

What is the term of the following definintion.
-Rationed using such mechanisms as gatekeepers who are primary care physicians who make all referrals to specialists, thus limiting coverage to service providers with whom the insurance company has a contractual agreement and requiring pre-certification or approval from the insurance company before services are rendered.

Question 10

What is the term of the following definintion.
-Annual limits on out-of-pocket expenditures that must be borne by the insured.

Question 11

Which of the following is defined when the insurance companies structure coverage to both avoid adverse selection and to attract lower-than-average risk subscribers?

A) Positive selection
B) Negative selection
C) Comprehensive selection
D) Beneficial selection

Question 12

Which piece of legislation allows Americans to cut back on work hours or end unsatisfying jobs because health insurance is now portable?

A) Health Insurance Portability and Accountability Act
B) Affordable Care Act
C) Consolidated Omnibus Budget Reconciliation Act
D) Emergency Medical Treatment and Active Labor Act

Question 13

Which of the following means that hospitals receive payment in full for all healthcare expenditures incurred in some pre-specified period of time?

A) Retrospective payment
B) Fee-for-service payment
C) Prospective payment
D) Optimal payment

Question 14

One problem in modeling the optimal insurance contract is that the degree of moral hazard may vary by type of illness or type of healthcare service.

Question 15

Because hospital income depends on actual costs incurred or on the volume of services provided, there are many incentives to minimize costs.

Question 16

Diagnosis-related groups are an example of what type of reimbursement method?

A) Retrospective payment
B) Fee-for-service payment
C) Prospective payment
D) Optimal payment