What might lead to a higher premium in health insurance plans?

The presence of adverse selection in health insurance occurs when individuals who are at a higher risk for medical issues are more likely to enroll in insurance plans. This situation leads to an imbalance in the risk pool, since insurers expect to cover the costs for these individuals. As a consequence, insurance companies may raise premiums to offset the increased likelihood of claims. Therefore, when higher-risk individuals enroll, the overall risk for the insurer increases, resulting in higher premiums to ensure that the insurer can cover potential expenses.

In contrast, a healthier lifestyle and low medical history typically correlate with lower premiums, as these individuals are less likely to require extensive medical care. Coverage for preventive care services can help reduce overall healthcare costs and encourage early treatment, often leading to lower premiums over time. Low utilization of medical services suggests that the insurance company will not have to cover many claims, which can also lead to lower premiums for the insured.