Final answer:
A guaranteed renewable policy guarantees not to increase premiums and ensures policy continuation. High copay policies are offered to those who use healthcare less, while high premium policies suit those expecting more healthcare usage. The Affordable Care Act mandates coverage to alleviate adverse selection.
Step-by-step explanation:
The type of health insurance contract where the premiums are guaranteed not to increase and the insurance company may not cancel the policy is commonly referred to as a guaranteed renewable policy. In such contracts, as long as premium payments are made on time, the insurer is obligated to renew the policy and maintain the premium rate, barring any changes made across an entire risk group.
Insurance companies may offer a policy with a high copay to customers who are looking to pay lower monthly premiums and expect to use medical services infrequently. Conversely, a policy with a high premium but a lower copay is typically offered to those who anticipate using healthcare services more often and are willing to pay more upfront to minimize out-of-pocket expenses per service.
Private insurance can be employment-based or direct-purchase. The Patient Protection and Affordable Care Act aims to mitigate the issue of adverse selection in the health insurance market by mandating coverage and making it illegal for providers to deny coverage based on preexisting conditions.