Still the government must then wrestle with the issue of adverse selection of these venture firms.
Perhaps the most famous and common application of adverse selection theory is in health insurance.
"It's adverse selection, " says David McSweeney, whose company Health Care Data Management audits big company plans.
What we need is something that helps us avoid adverse selection and the death spiral.
The danger, Mr Peabody says, is that a process of adverse selection is under way.
And yet they do, and for the most part the adverse selection problem does not cause problems.
The theory of adverse selection was first applied by George Ackerlof to the market for used cars in the 1970s.
Critics have focused on the adverse selection problem, or that the real issue is that schools are just too expensive.
By focusing on a less efficient portion of the market where there is no institutional VC powerhouse, there is less adverse selection.
So tell me, dear reader, why is it that buffets do not succumb to the adverse selection problem and cease to exist?
Known as adverse selection, this phenomenon would eventually make the program unsustainable.
The economic theory of adverse selection tells us that neither should exist.
One powerful way to combat the adverse selection problem is to give insurers larger, more diverse pools of customers to deal with.
Adverse selection also works on a smaller scale than health care reform.
By adverse selection the weakest, least mobile and least employable have remained.
One is adverse selection: the people who most want to purchase insurance are those who are most likely to need it ie, the bad risks.
Like insurers, the providers will want to leave themselves some room for error, and the prospect that there could be adverse selection on the exchanges.
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If genetic information is kept secret from insurers, but individuals have the freedom to add or drop insurance coverage, then problems of adverse selection may arise.
Like most financing experts, David believes a universal program is probably the only way to solve the participation and adverse selection problems that plague voluntary long-term care insurance.
WellPoint said some of its plans were hurt by adverse selection, which involves healthy members dropping coverage and leaving a greater concentration of people who generate more in claims than they contribute in premiums.
Such adverse selection would increase costs to Tenet.
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That leaves the industry exposed to adverse selection, whereby young and healthy (read: inexpensive) customers avoid buying cover until they are ill, at which point new regulations will force the industry to issue them cover.
Dr Cook-Deegan was one of the authors of a study that showed a significant risk of adverse selection in the market for long-term-care insurance (the sort bought by the young in order to ensure they have nursing care when they become old and infirm).
Consequently, insurers will have to raise premiums for the entire pool to offset these shifts, creating an adverse selection spiral in which both younger and older people remaining in the pool end up with higher premiums than if regulators had not intervened in the market in the first place.
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These kinds of adverse-selection effects crop up at the company level in health insurance, too.
Some experts reject the adverse-selection argument, even as they affirm their concern about the future of the insurance market.
But both the selection bias and regular-phone-use definition might be expected to mask any adverse effect of phones.
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