Asymmetric information in the health insurance market causes prices to ________ and the mix of insured customers to become ________ healthy on average.

Question

Quizplus · Accepted Answer

Asymmetric information in the health insurance market leads to adverse selection, where healthier individuals are less likely to purchase insurance, and sicker individuals are more likely to purchase insurance. This leads to an increase in the overall risk and costs for insurers, causing them to raise prices. Additionally, since healthier individuals are less likely to purchase insurance, the mix of insured customers becomes less healthy on average.

Asymmetric Information in the Health Insurance Market Causes Prices to ________