To prevent the moral hazard problem,health and life insurance companies may write policies

Question

Quizplus · Accepted Answer

Writing policies that reduce or eliminate benefits for prespecified illnesses can prevent the moral hazard problem by discouraging individuals from purposely contracting an illness to receive benefits. Option A would only encourage individuals to contract an illness to receive increased benefits, which exacerbates the moral hazard problem. Option C would not necessarily prevent moral hazard but could lead to increased healthcare costs for both the insurance company and policyholders. Option D includes a provision that worsens the moral hazard problem and is therefore not a valid choice.

To Prevent the Moral Hazard Problem,health and Life Insurance Companies