Question

Which of the following is an explanation for why employers are a major source of health insurance in the U.S.?

A. Insuring at the employer level mitigates adverse selection among individual insurance enrollees.

B. Employee compensation in the form of health insurance is not taxed.

C. Insuring at the level of the employer facilitates the creation of larger insurance pools with a more predictable distribution of risk.

D. All of the above

E. None of the above

Answer 1

Solution: All of the above

Explanation: In insurance the collective choice mitigates adverse selection and employer-paid premiums for health insurance are exempt from payroll taxes and federal income.