Health insurance companies often place limitations on the services covered by the insurance to deal with the:

Question

Quizplus · Accepted Answer

Health insurance companies face the issue of asymmetric information, where the insured may have more information about their health status and medical needs than the insurer. This can lead to adverse selection, where those with higher health risks are more likely to seek insurance, leading to higher costs for the insurance company. To address this problem, health insurance companies place limitations on the services covered by the insurance. This is done to reduce the potential for moral hazard, where the insured may take more risks or seek unnecessary treatments if they are covered by insurance.

Health Insurance Companies Often Place Limitations on the Services Covered