Employer sponsored health care coverage create situation in which health insurers face high moral hazard.

a. Graphically describe how health insurance creates this moral hazard. In your answer, specifically show the change in healthcare consumed by an employee when comparing a person with no health insurance to the same person when they have full insurance coverage.

b. Based on the graph in part a above, discuss how and why insurers have tried to use cost shifting devices like participating deductibles to control moral hazard. Show on your graph the impact of using a participating deductible on the demand for healthcare.

Answer rating: 100% (QA)

a Here is a graphical representation of how employersponsored health insurance creates moral hazard ... View the full answer