Health insurance companies impose deductibles on policies and co-payments on claims to reduce the problem of adverse selection.

Question

Quizplus · Accepted Answer

Deductibles and co-payments are primarily used to mitigate moral hazard, not adverse selection. They encourage policyholders to avoid unnecessary claims and share in the cost of care. Adverse selection is addressed through underwriting and pricing strategies.

Health Insurance Companies Impose Deductibles on Policies and Co-Payments on Claims