Without health insurance in the United States, costs for health care can be out of control and unmanageable for most individuals. These are facts that the government knows to be true as well as private insurers. If not covered by a government funded or public plan, an alternative is to seek coverage through a private insurer. Currently, individual plan purchase is available. For others, employer sponsored plans are available to participate in. The hope is that with all of these options obtainable, people will enroll in some type of health insurance coverage. But this is where adverse selection comes into play. This phenomenon occurs when too many individuals that are more sick or risky to cover than the average person seek insurance coverage.
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For small businesses, or those who want to cover fewer employees, underwriting is more important because the effect one person has on the small pool of insureds has more of an impact on premiums than if they were covered in a large employer’s insurance pool. If one person is extremely ill or risky in a smaller setting, it has a larger effect that it would elsewhere. Insurance providers want to know this information beforehand so they are able to determine how much risk is present and determine what the cost will be for individuals signing up for coverage. This tends to occur more for individuals seeking coverage because the assumption is that they need the care and have some type of risk associated with them. On the other hand, if companies do an open enrollment for all of their employees, providers usually do not perform underwriting on each person because they assume most will be healthy and fewer will be risky and file claims. Larger populations make the risk easier to spread out. The example from the text of “1000 five employee groups being less stable than one employer with 5000 employees” is right on. With only five people in a group, the cost will increase for each person if somebody becomes ill. With 5000 others to count on, that share will not be as …show more content…
citizens and legal residents to have qualifying health coverage” (Kaiser Family Foundation, 2013). If they elect to be uninsured, the result will be a tax penalty of approximately 2.5% of their taxable income. As time goes on, the rates will continue to rise for not having appropriate coverage, ideally forcing people into selecting a health insurance plan. The Individual Mandate affects most people except for “those suffering financial hardship, religious objections, American Indians, undocumented immigrants, incarcerated individuals, and elderly above age 65”. With the Individual Mandate requiring the majority of Americans to have health insurance, insurers will be looking at more problems in the future. There will always be risky and sick people, but by forcing them into selecting plans, the risk will follow them wherever they go. Eventually when adverse selection happens from having too many risky people in a covered pool, we will see costs continue to rise for the majority creating more problems for insurance providers to keep everyone happy. This could result in similar consequences to Harvard University’s downfall of the PPO, but over a larger population and with more plans
For small businesses, or those who want to cover fewer employees, underwriting is more important because the effect one person has on the small pool of insureds has more of an impact on premiums than if they were covered in a large employer’s insurance pool. If one person is extremely ill or risky in a smaller setting, it has a larger effect that it would elsewhere. Insurance providers want to know this information beforehand so they are able to determine how much risk is present and determine what the cost will be for individuals signing up for coverage. This tends to occur more for individuals seeking coverage because the assumption is that they need the care and have some type of risk associated with them. On the other hand, if companies do an open enrollment for all of their employees, providers usually do not perform underwriting on each person because they assume most will be healthy and fewer will be risky and file claims. Larger populations make the risk easier to spread out. The example from the text of “1000 five employee groups being less stable than one employer with 5000 employees” is right on. With only five people in a group, the cost will increase for each person if somebody becomes ill. With 5000 others to count on, that share will not be as …show more content…
citizens and legal residents to have qualifying health coverage” (Kaiser Family Foundation, 2013). If they elect to be uninsured, the result will be a tax penalty of approximately 2.5% of their taxable income. As time goes on, the rates will continue to rise for not having appropriate coverage, ideally forcing people into selecting a health insurance plan. The Individual Mandate affects most people except for “those suffering financial hardship, religious objections, American Indians, undocumented immigrants, incarcerated individuals, and elderly above age 65”. With the Individual Mandate requiring the majority of Americans to have health insurance, insurers will be looking at more problems in the future. There will always be risky and sick people, but by forcing them into selecting plans, the risk will follow them wherever they go. Eventually when adverse selection happens from having too many risky people in a covered pool, we will see costs continue to rise for the majority creating more problems for insurance providers to keep everyone happy. This could result in similar consequences to Harvard University’s downfall of the PPO, but over a larger population and with more plans