Question

Until 2019, the Affordable Care Act included a mandate. The mandate was to avoid which of the following

		positive externalities
		too little competition
		adverse selection problem
		negative externalities

Answer 1

Option C is correct.

There are different viewpoints about how successful the Affordable Care Act has been in improving the healthcare market. Many people chose to remain uninsured and pay the penalty. The act mandate requires most Americans to have health insurance or pay a tax penalty unless you qualify for an exemption. One interpretation of the act is, there are penalties for not purchasing insurance were too small to prevent a significant amount of adverse selection. If customers differ in their relevant attributes (whether they have a chronic disease) and those differences are known to customers but not to insurers, mix people choose to buy insurance may be especially expensive to insure. In particular, people with greater hidden health issues are likely to buy health insurance than healthy people. As a result, an insurance company to cover its costs, the price of health insurance must reflect the cost of a sick person is more than the average person. Even average health people may see the high price and decide to go without insurance. As people drop coverage, the insurance market fails to achieve its purpose of eliminating the financial risk of illness. And so the law has increased the number of people with health insurance, which was one of its main goals.