When firms participate in group health insurance for all employees, it:
A) raises rates for everyone, because it brings unhealthy people into the pool.
B) raises rates for unhealthy people.
C) may lower rates for all people to the extent that it keeps healthy people in the pool.
D) prevents unhealthy people from "selecting out," to the detriment of healthy people.
E) increases the amount of information available to insurers about the population.

Question

Quizplus · Accepted Answer

When firms participate in group health insurance for all employees, it may lower rates for all people to the extent that it keeps healthy people in the pool. This is because having a large pool of both healthy and unhealthy individuals spreads the risk, which reduces the overall cost of healthcare. Insurers are also able to negotiate lower premiums with healthcare providers when they have a larger pool of insured individuals.

When Firms Participate in Group Health Insurance for All Employees