If fewer families purchase health insurance because of rising health insurance premiums, then health insurance premiums are likely to rise further due to:

Question

Quizplus · Accepted Answer

The phenomenon described in the scenario is a classic example of adverse selection. Adverse selection occurs when the people who are most likely to use a service or product are also the ones most likely to purchase it. When health insurance premiums rise, healthy people may forego coverage, leaving mostly sick and high-risk individuals to purchase insurance. This leads to higher claims costs for insurers, who pass on those costs to consumers in the form of even higher premiums, leading to a cycle of rising costs and declining enrollment.

If Fewer Families Purchase Health Insurance Because of Rising Health