The Pre-Existing Condition Insurance Plan is a federally administered part of the Affordable Care Act, and is designed for people with pre-existing medical conditions to obtain insurance.By offering health insurance to all U.S.citizens with pre-existing medical conditions, the Pre-Existing Condition Insurance Plan eliminates ________ for both the insurer and the insured, and eliminates ________ for the issuer of the insurance policy.

Question

Quizplus · Accepted Answer

The Pre-Existing Condition Insurance Plan tackles the issue of asymmetric information, where the insurer may not have access to all relevant information about the insured's medical history, by offering insurance to all those with pre-existing conditions. This eliminates adverse selection for both the insurer and insured parties. The plan does not directly address the principal-agent problem (where the actions of the agent - the insurer - may not align with the interests of the principal - the insured), or moral hazard (where insured parties may take on risky behaviors due to being insured).

The Pre-Existing Condition Insurance Plan Is a Federally Administered Part