Answer to Question #155990 in Microeconomics for Noushin

Question

Briefly explain whether you agree with the following statement: ‘The reluctance of healthy young

adults to buy private health insurance creates a moral hazard for insurance companies’.

-Which ‘types’ of young people are more likely to buy health insurance?

-Is this a problem of moral hazard per se? How does ‘moral hazard’ fit in?

Answer 1

Disagree. Moral hazard becomes a problem after one purchases insurance. In this​ case, the reluctance of​ young, healthy adults to purchase insurance in the first place leads to an adverse selection problem.

Young people with no option to buy coverage at work are the ones whom are likely to buy health insurance.

No.