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Which of the following is an example of adverse selection a
Which of the following is an example of adverse selection
a. patients without insurance eat unhealthier foods than those with insurance.
b. insurance companies aren't always fully aware of a patient's family medical history.
c. consumers don't know the full cost of health care.
d. consumers trust that doctors are ordering only the relevant procedures.
Expert Solution
- The correct option is b. insurance companies aren't always fully aware of a patient's family medical history.
This is a form of adverse selection as customers who know that they are more vulnerable to certain diseases evade checks and pay the same premium as customers not affected by the disease. This leads to the insurance company having to pay a higher than expected benefit amount and causes the company losses.
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