General problem of adverse selection and variance
The legislature of the United States recently revoked the “individual mandate” of the Affordable Care Act, which required every person to carry health insurance or else to pay fine. The purpose of the mandate was to ensure that young people and healthy people as well as older or sicker people carry insurance, so that insurance pool would be risk-diverse. Adverse selection s the tendency of healthy people to avoid buying insurance while sick people are more likely to insure themselves.
Give some thought to the general problem of adverse selection and variance, and offer one strategy that insurance companies might use to attract you into insurance market!
What do you think is the most important message that insurance companies and the government can send to young people to convince them of the importance of carrying health insurance to prevent routine illness and to protect against unforeseen really bad things happening to them?
Answer in 4 paragraphs long and do not analyze the insurance market under the ACA.
Answer preview to general problem of adverse selection and variance
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