Question

In the case of adverse selection in the health insurance market efficient Cannot be improved by:...

In the case of adverse selection in the health insurance market efficient Cannot be improved by:

a. partial insurance (with the insuree's own contribution)

b.the requirement to undergo medical tests and present their results to the insurer

c. group insurance

d.None of right

e.goverment intervention( introduction of mandatorry insurance for everyone)

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Answer #1

Option E is correct

Partial insurance and group insurance definitely improve the market outcome and is a move towards socially efficient one. This is because of reduction in overall insurance cost. Government intervention in case of mandatory medical tests will help in sorting out the most unhealthy people. However insurance that is mandatory for everyone is not likely to improve the market outcome. This is because insurance companies will not be able to differentiate between those who need insurance the most and those who need the insurance the least.

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