1) In Australia, health insurance laws include the following two provisions: i Insurance companies must offer health insurance to everyone who applies and charge them the same price. ii Everyone who earns more than $90,000 (or $180,000 for families) must buy health insurance or pay a penalty, called the Medicare Levy Surcharge, for not doing so. a. Which of these provisions taken on its own makes the problem of adverse selection worse? Explain. b. Why do you think the provision you identified in part (a) was included in the law? c. Why do you think the other provision was included in the law?

1) In Australia, health insurance laws include the following two provisions: i Insurance companies must offer health insurance to everyone who applies and charge them the same price. ii Everyone who earns more than $90,000 (or $180,000 for families) must buy health insurance or pay a penalty, called the Medicare Levy Surcharge, for not doing so. a. Which of these provisions taken on its own makes the problem of adverse selection worse? Explain. b. Why do you think the provision you identified in part (a) was included in the law? c. Why do you think the other provision was included in the law?