Thanks a lot . One result of asymmetric information in health insurance markets

Question

Thanks a lot .

One result of asymmetric information in health insurance markets is an optimal number of insurance policies sold. adverse selection. externalities in consumption. a low marginal benefit of additional information for the buyer of insurance. The principal-agent problem. Insurers try to minimize moral hazard by only selling policies to individuals with high ethical standards. requiring advance payments of premiums. charging higher premiums to individuals than to groups. charging deductibles and coinsurance. refusing to sell insurance to individuals with chronic illnesses. The goal of health insurance is to redistribute income from the sick to the healthy. spread risk over a large group of people. equally distribute the probability of loss over a large number of people. collect sufficient premiums to cover all possible losses. equalize the availability of medical care across population groups. Insurance works best in situations where there is a high probability of a small loss. a low probability of a small loss. a high probability of a large loss. a low probability of a large loss. the level of probability and the size of the loss are irrelevant. A major factor contributing to the growth in employee-based health insurance in the United States has been greater than average economic growth leading to increased demand for labor. the tax free treatment of health insurance as an employee benefit. legislation requiring all firms to provide health insurance to all full-time workers. the long standing tradition in the United States of providing a generous package of benefits to all workers. A group of 100 people seek out an insurance company to underwrite health insurance for its members. If expected medical spending for the group is $150,000, what will the average premium be if the health insurance company estimates the premium adding net loading costs of 20 percent? $1,200 $1,500 $1,800 $3,000 Continuing from the question above, an additional 10 people join the group who have expected medical spending of $5,000 per person on average. The new premium will be approximately $1,500 $2,200 $2,500 $4,500

Explanation / Answer

27.. adverse selection

Adverse selection- immoral behavior that takes advantage of asymmetric information before a transaction. For example, a person who is not be in optimal health may be more inclined to purchase life insurance than someone who feels fine.

28..

the answer is(d)

The company could impose a deductible on insurance policies so that each loss costs the insured something out-of-pocket

29...(d)

30...(a).

31..(d)

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