When considering the adverse-selection problem in the case of medical insurance,as the cost of insurance rises
A) healthy people might reduce their coverage while unhealthy people will maintain their coverage.
B) unhealthy people might reduce their coverage, while healthy people will maintain their coverage.
C) both healthy and unhealthy people will likely reduce their coverage.
D) both healthy and unhealthy people will likely maintain their coverage.

Question

Quizplus · Accepted Answer

Adverse selection in medical insurance refers to a situation where individuals with higher health risks (unhealthy people) are more likely to purchase or maintain insurance coverage, while those with lower health risks (healthy people) are more likely to opt out or reduce their coverage as the cost of insurance rises. This is because healthy people might not see the value in paying high premiums when they rarely use the services, whereas unhealthy people, who need more medical care, are more likely to see the value in maintaining their coverage despite higher costs.

When Considering the Adverse-Selection Problem in the Case of Medical