Final answer:
Transfers of business among different group plans are discouraged because they can lead to adverse selection. Insurance companies prefer to mix together a group of individuals with varying levels of risk to mitigate this issue.
Step-by-step explanation:
Transfers of business among different group plans are discouraged because it can lead to adverse selection. Adverse selection occurs when insurance companies attract only those who have high risks and fail to attract individuals with lower risks. To mitigate this risk, insurance companies often sell insurance through groups based on place of employment or other affiliations. By mixing together a group of people with varying levels of risk, insurance companies reduce their fear of attracting only high-risk individuals.