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What implications does Adverse Selection have on Medicare, the private individual market, the employer-sponsored market, consumer...

What implications does Adverse Selection have on Medicare, the private individual market, the employer-sponsored market, consumer directed health plans, and even the ACA?

Solutions

Expert Solution

The number of uninsured becomes increased in the U.S because of the compulsion of legal residents. It leads to the increase of private coverage. In the healthcare market, the individual is purchasing qualified insurance plans. Thus the expected medical costs covered by 60-90%. People who are at risk are ready to buy it. The ACA also in favor of private insurance. The healthcare services are cost so high, the individual is ready to pay the risk premium. The employer also paying higher taxes as the income raises. The risk premium leads to higher losses on individuals. Each person is willing to maximize the utility. The marginal utility affects the wealth of risk seekers. So the demand is higher in the more affluent areas of adverse selection.

The increasing the size of possible loss the greater demand for insurance. Employees are choosing different packages based on cost-sharing. They are choosing cost reducing cheaper coverage. The purchasers should have detailed knowledge of selected health plan. The adverse selection has to be removed from the consumer concern as per ACA. The HMO also impact on the adverse selection of Medicare, private individual market, employer-sponsored market. Do not penalize persons for unhealthy. All people should be put under one risk pool.


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