Module 1, Part 3: Adverse Selection
In Part 3, we’ll broaden our study of insurance purchasing to the market level and study how the presence of adverse selection can affect insurance markets and premiums.
Objectives
- Explain and draw graphically a simplified insurance market with adverse selection
- Calculate the insurer loss or profit at a given price
- Calculate the equilibrium price in the market under some assumptions on insurer profitability
- Solve for the subsidy amount or penalty amount that would ensure full insurance in a market
Activities
- In-class problem on adverse selection. The worksheet is here.
- Supplemental information about uninsurance in the US, available here
- New report on U.S. health care: U.S. Health Care from a Global Perspective
Slides
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