If government intervenes in the market for health insurance in order to address the adverse selection problem and improve efficiency:

Question

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Adverse selection in health insurance markets occurs when high-risk individuals are more likely to purchase insurance, or purchase greater amounts, than low-risk individuals, knowing their higher likelihood of needing it. This can lead to higher premiums for everyone, potentially driving low-risk individuals out of the market. Government intervention, such as mandating insurance coverage or providing subsidies, aims to keep low-risk individuals in the market, effectively spreading the risk. This results in a redistribution from low-risk to high-risk individuals, as low-risk individuals end up paying more into the system relative to their expected use of healthcare services, subsidizing the high-risk individuals who are more likely to use those services.

If Government Intervenes in the Market for Health Insurance in Order