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Suppose the Government is considering removing the principle of community rating in setting insurance premiums and allowing private health insurance to set risk-adjusted premiums. Explain the likely implications of this change, particularly for different risk groups (e.g. consider the implications for people who are at (i) high risk of falling ill and (ii) who are at low risk of falling ill). How will the change impact the incentives faced by private health insurers, and how would you expect it to affect their behaviour?

Suppose the Government is considering removing the principle of community rating in setting insurance premiums and allowing private health insurance to set risk-adjusted premiums. Explain the likely implications of this change, particularly for different risk groups (e.g. consider the implications for people who are at (i) high risk of falling ill and (ii) who are at low risk of falling ill). How will the change impact the incentives faced by private health insurers, and how would you expect it to affect their behaviour?

Understanding Business
Understanding Business
12th Edition
ISBN:9781259929434
Author:William Nickels
Publisher:William Nickels
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Suppose the Government is considering removing the principle of community rating in setting insurance premiums and allowing private health insurance to set risk-adjusted premiums. Explain the likely implications of this change, particularly for different risk groups (e.g. consider the implications for people who are at (i) high risk of falling ill and (ii) who are at low risk of falling ill). How will the change impact the incentives faced by private health insurers, and how would you expect it to affect their behaviour?
Transcribed Image Text:Suppose the Government is considering removing the principle of community rating in setting insurance premiums and allowing private health insurance to set risk-adjusted premiums. Explain the likely implications of this change, particularly for different risk groups (e.g. consider the implications for people who are at (i) high risk of falling ill and (ii) who are at low risk of falling ill). How will the change impact the incentives faced by private health insurers, and how would you expect it to affect their behaviour?
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