Insurance companies collect premiums from policy holders to generate profits. Individual pays the insurer to continue coverage for any future medical utilization satisfying both parties. Unfortunately for the insurance companies not all individuals are healthy and may have life-long illnesses requiring more medical care. Gapenski (2013) identifies the disproportionate tendency of the sick to acquire health insurance as adverse selection.
Adverse selection is considered a major issue since it involves an overwhelming number of the sick to file potential claims therefore spiking monthly premiums for both the healthy and the unhealthy (Gapenski, 2013). This effect the healthier individual and hospitals. The rise in premiums from adverse selection
Adverse selection is considered a major issue since it involves an overwhelming number of the sick to file potential claims therefore spiking monthly premiums for both the healthy and the unhealthy (Gapenski, 2013). This effect the healthier individual and hospitals. The rise in premiums from adverse selection