Insurers reduce the problem of moral hazard by limiting coverage of open-ended treatments like psychotherapy or fully elective treatments like some cosmetic surgeries.

Question

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Insurers reduce the problem of moral hazard by limiting coverage of open-ended treatments like psychotherapy or fully elective treatments like some cosmetic surgeries, as such treatments can be abused by the insured seeking treatment that is unnecessary or overly expensive, leading to increased costs for the insurer and premiums for all policyholders. By limiting coverage, insurers reduce the incentive for such abuse and encourage the insured to seek only necessary, cost-effective treatments.

Insurers Reduce the Problem of Moral Hazard by Limiting Coverage