Adverse Selection Research Paper

Decent Essays
Adverse selection Individuals who are sick are more likely to purchase health insurance than healthy people. This “sicker population” might utilize a significant amount of healthcare services. In order to cater to this demand insurance companies will resort to raising the premiums, dissuading healthy people from buying insurance. As the pool of people covered by insurance becomes sicker it continues to drive up costs leading to a vicious cycle where each year fewer and fewer healthy individuals obtain insurance. This process is called adverse selection. By implementing the individual mandate, we introduce healthy people into the insurance pool. The healthy individuals mitigate the cost of sicker individuals. As a result of requiring people
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