Week 6

Question 1

define catastrophic hazard

Answer 1

event that exceeds insurance companys ability to pay

Question 2

define adverse selection

Answer 2

ppl buy ins b/c they anticipate loss

Question 3

define incentives to create losses

Answer 3

individual gains from an apparent loss

Question 4

define supplier-induced demand

Answer 4

demand does not come purely from the provider

Question 5

define primary agent problem

Answer 5

occurs when one person can make decision on behalf of another person

Question 6

define moral hazard

Answer 6

one party engages in risky behavior knowing another party will hold the financial consequence ex: less likely to care if you wreck your car if the ins would cover more than what the cars worth

Question 7

how do ins deal with catastrophic hazard

Answer 7

exclude certain things from coverage

Question 8

solution to adverse selection

Answer 8

waiting periods, underwriting, coverage limits

Question 9

what restrictions did the ACA place on insurers?

Answer 9

• cannot do medical underwriting
• cant end coverage when policyholders get sick
• waiting periods capped at 90 days
• no annual or lifetime benefit limits
• insurers must cover “essential health benefits”

Question 10

T/F the ACA allowed dependents to stay on parent’s policy until age 26

Answer 10

true

Question 11

Rand health insurance experiment:
did people make health appts less when they had to pay for them?
did cost shaering impact health?
people in cost sharing plans worried less about their health

Answer 11

yes
no
yes

Question 12

why is pharmacy coverage an exception to traditional insurance principals?

Answer 12

drug therapy is preventative and prevents expensive future costs decreasing cost to insurer