Assume that the riskiest individuals in a given population are the ones most likely to apply for health insurance.In this situation a provider of health insurance faces the problem of ________.

Question

Quizplus · Accepted Answer

This scenario describes adverse selection, which occurs when individuals with a higher risk or likelihood of using insurance are more likely to purchase it, leaving the insurance provider with a higher risk pool and potentially leading to increased premiums or losses. Moral hazard refers to the idea that having insurance may cause individuals to take greater risks or use more healthcare services than they would otherwise, opportunity costs refer to the benefits lost by choosing one alternative over another, and tertiary impedence is not a recognized term.

Assume That the Riskiest Individuals in a Given Population Are