Small companies typically find it more expensive, on a per employee basis, to buy health insurance for their workers, as compared with larger companies. Similarly, it is usually less expensive to obtain health insurance through an employer-provided plan than purchasing it directly from an insurance company—even if your employer requires you to pay the entire premium. Use the ideas from this chapter to explain these observations.
Answer to relevant QuestionsThe problem of adverse selection in insurance markets means that it is generally abed deal for companies to offer insurance at the same price for all potential customers. Why then do we observe some insurance companies (such ...Describe the dimensions along which moral hazard can exist. Can you think of ways in which the government can reduce the prevalence of moral hazard along each dimension? The government of Westlovakia has just reformed its social security system. This reform changed two aspects of the system: (1) It abolished its actuarial reduction for early retirement, and (2) it reduced the payroll tax by ...Prior to 1982 college-age children of deceased workers received college tuition subsidies as benefits of the Social Security program. Drawing on the lessons of Chapter 11, what do you think the rationale for such a program ...For each of the reforms listed, briefly discuss the pros and cons of the reform, paying attention in particular to efficiency implications (through potential behavioral responses to the change) and equity implications (who ...
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