In: Economics
Under which condition(s) would a strict welfare economist agree that an obese worker joining a workforce imposes externalities through group health insurance?
a. If an obese worker uses more health care than non-obese workers and premiums rise
b. If an obese worker gets sick and misses work more often and the non-obese workers have to pick up the slack working short-handed
c. If the fact of insurance coverage makes all workers, obese and non-obese alike, start eating more and exercising less so that all gain weight and premiums rise
d. If an obese worker joining the workforce makes a single worker less proud of their annual group picture
Answer a. If an obese worker uses more health care than non-obese workers and premiums rise.
Reason- If obese worker uses more health care than non obese workers, the insurance company would start facing loss and will increase premiums.
Since the premium is same for everyone.
A non obese worker will find this premium too high as they need less healthcare. So it creates externality.