Asked by Siqian Chang on Jun 01, 2024
Verified
The 2010 Health Care Reform Law, also known as "Obamacare," includes a part known as universal coverage which requires everyone to have health insurance. One reason for this is to address the problem of
A) moral hazard.
B) externalities.
C) adverse selection.
D) efficiency losses.
Health Insurance
A form of insurance that covers the cost of an insured individual's medical and surgical expenses.
Obamacare
Informal term for the Affordable Care Act, a comprehensive health care reform law enacted in March 2010 in the United States aimed at expanding health insurance coverage and reducing healthcare costs.
Externalities
The positive or negative impacts of a market transaction experienced by third parties not directly involved in the transaction.
- Learn about the difficulties of adverse selection and its repercussions on markets, notably in the insurance and banking industries.
Verified Answer
ZK
Zybrea KnightJun 07, 2024
Final Answer :
C
Explanation :
Adverse selection occurs when there is a lack of symmetric information prior to a transaction, leading to a situation where healthier individuals opt out of health insurance, leaving a pool of more risk-prone individuals. This increases the cost for insurers, which can be mitigated by requiring everyone to have health insurance, thus spreading the risk.
Learning Objectives
- Learn about the difficulties of adverse selection and its repercussions on markets, notably in the insurance and banking industries.