Adverse selection occurs in the health insurance market because

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Adverse selection occurs in the health insurance market because it is difficult for insurance companies to distinguish between high risk and low risk customers. Healthy individuals are less likely to purchase health insurance while sick individuals are more likely to purchase insurance, resulting in a higher concentration of high-risk customers in the insurance pool. This leads to higher premiums for everyone, including low-risk individuals, which may further discourage them from purchasing insurance.

Adverse Selection Occurs in the Health Insurance Market Because