One Reason Why Adverse Selection Problems Arise in Health Insurance

question 63

Multiple Choice

One reason why adverse selection problems arise in health insurance markets is that

• A)sick people are more likely to want health insurance than healthy people.
• B)because of advances in medical technology, people are living longer. These medical advances are costly and drive up the price of insurance for everyone.
• C)the average age of citizens of the United States has increased in recent years, and will continue to increase over the next 20 to 30 years. As older citizens retire, more and more of their medical bills will have to be paid by younger workers.
• D)fewer men and women are choosing medical careers because of the increase in the cost of malpractice insurance.

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Definitions:

Fiscal Year

A one-year period that companies use for financial reporting and budgeting, which may not align with the calendar year.

Depreciation Expense

The process of distributing the financial burden of a tangible asset over its life expectancy.

General Journal Entry

A General Journal Entry is a record of financial transactions in the general ledger, detailing the accounts affected, amounts, and dates, serving as the first step in the accounting cycle.

Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company's financial condition at a specific moment, showing assets, liabilities, and shareholders' equity.