Question

All of these are used to prevent adverse selection in a group dental plan EXCEPT

a) Eligibility waiting periods
b) Pre-existing condition clauses
c) Mandatory enrollment for all eligible members
d) Guaranteed issue for all participants

Answer 1

In a group dental plan, mechanisms used to prevent adverse selection include eligibility waiting periods, pre-existing condition clauses, and mandatory enrollment. However, guaranteed issue does not prevent adverse selection, as it may attract a disproportionate number of high-risk individuals. Correct option is D.

Step-by-step explanation:

The question is about methods used to prevent adverse selection in a group dental plan. Adverse selection is a problem that insurance companies face when there is a possibility of only high-risk individuals purchasing insurance, which could lead to significant losses for the company. To mitigate this risk, certain mechanisms such as eligibility waiting periods, pre-existing condition clauses, and mandatory enrollment for all eligible members are employed. However, the guaranteed issue, which means offering insurance to any applicant regardless of their health status, does not prevent adverse selection; in fact, it can contribute to it. The Affordable Care Act (ACA) tried to address this issue by mandating that all Americans have health insurance and preventing insurers from denying coverage based on preexisting conditions, thereby balancing the risk pool with both healthy and unhealthy individuals.