adverse selection


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Adverse Selection

Clinical genetics An event in which an insurer avoids underwriting a person whose genetic profile indicates a high chance of suffering an "expensive" condition in the future—e.g., Huntington’s disease (Armed with such information, an insurance carrier may deny coverage—i.e., adversely select—a person with a high risk of suffering the disease in question; alternatively, that person may take out a large insurance policy on standard terms).
Health insurance The tendency of those with greater-than-average health risks to apply for, or maintain, insurance coverage.
Managed Care
(1) A stance adopted by health care insurers, which fiercely compete among themselves to insure the healthiest and wealthiest segment of a particular population, and thus adversely select the population which they target for selling insurance policies.
(2) The selection of a health plan, whether indemnity or managed care, over other plans by those enrollees who are more likely to file claims and use services, causing an inequitable proportion of enrollees requiring more medical services in that plan.

adverse selection

Managed care
1. A stance adopted by health care insurers, which fiercely compete among themselves to insure the healthiest and wealthiest segment of a particular population, and thus adversely select the population which they target for selling insurance policies. See 'Safety net' hospital.
2. A health plan, whether indemnity or managed care, is selected over other plans by enrollees who are more likely to file claims and use services, causing an inequitable proportion of enrollees requiring more medical services in that plan.

adverse selection

The enrollment in a health plan of those who are sicker or use more health care services than the general population.
See also: selection

adverse selection,

n a statistical condition within a group when there is a greater demand for dental services and/or more services necessary than the average expected for that group.
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References in periodicals archive ?
56) At its core, the "skimming" argument contains two critical components and pivots on a doctrine, adverse selection, which is central to, among other enterprises, insurance markets.
The welfare cost of adverse selection is determined by the demand curve for insurance as well as the average cost curve.
Adverse selection (and basis risk) is modeled differently in the literature.
Consequently, we expect a lower magnitude of the spreads, of the adverse selection component of the spread, and of the PIN for those issues where additional information is revealed between the filing of the prospectus and the offer date.
Economists Katherine Baicker of Harvard University and William Dow of the University of California at Berkeley discuss policies to mitigate the problem of adverse selection in the individual and small group health insurance market.
In theory, adverse selection arises because those in good health and with low risk of health problems choose not to purchase health insurance because premiums based on average health risks do not adequately reflect their relatively better health.
In this paper, we extend the work of Genesove (1993) and Chezum and Wimmer (1997) and Wimmer and Chezum (2003) by characterizing adverse selection as a sample selection problem in a setting in which sellers possess (1) an informational advantage over buyers and (2) characteristics that correlate with both seller incentives to select goods adversely and the quality of goods produced.
Stewart (1994) looks at an economy where both adverse selection and moral hazard are present.
To grow premium while avoiding adverse selection, an increasing number of insurers will begin to utilize the performance safety net in analytic technologies.
While principles like adverse selection and the spreading of risk are essential to the concept of insurance as we know it, they apply not only to populations within colleges and universities.
Health Net will need to exercise great care to avoid adverse selection (i.
Many theoretical models conclude that when adverse selection is a problem, good risks will be rationed: They will be allowed to purchase only limited coverage in an attempt to make such coverage less attractive to the bad risks, who would otherwise be eager to purchase it given its favorable price.