If a health insurer charges a rate equal to the average cost of health care for the entire population, then it is likely that
A)everyone buys health insurance.
B)unhealthy people will not buy health insurance.
C)healthy people will not buy health insurance.
D)nobody will buy health insurance.

Question

Quizplus · Accepted Answer

When a health insurer charges a rate based on the average cost of health care for the entire population, healthy individuals may perceive the cost as too high relative to their expected use of health care services. Consequently, they might opt out of purchasing insurance, leaving a higher proportion of unhealthy individuals in the insured pool. This phenomenon is known as adverse selection.

If a Health Insurer Charges a Rate Equal to the Average