Consider Two Types of Rules That Might Govern an Otherwise

question 5

Essay

Consider two types of rules that might govern an otherwise unregulated health insurance market: (1) Insurance companies can price-discriminate against the sick and old; (2) insurance companies cannot price discriminate against the sick and old.Explain why, in equilibrium, insurance may be very expensive for the sick and old regardless of which case we find ourselves in.

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Definitions:

Plasma Proteins

Proteins found in blood plasma, playing roles in blood clotting, defense against disease, and transportation of substances.

Capillaries

The smallest blood vessels in the body, facilitating the exchange of nutrients and waste materials between the bloodstream and tissues.

Jugular Trunks

Large lymphatic vessels in the neck that drain lymph from the head, neck, and upper chest back into the bloodstream.

Subclavian Trunks

Lymphatic vessels in the shoulder area that drain lymph from the upper limbs, thoracic wall, and breast.