Final answer:
Insurance companies offer policies with high copays to individuals who do not anticipate requiring extensive healthcare and are willing to pay higher out-of-pocket costs.
Step-by-step explanation:
An insurance company may offer different health insurance policies with varying structures of copayments and premiums to suit the needs and risks of different customers. A policy with a high copay is generally offered to those who are willing to pay more out-of-pocket costs when accessing healthcare services, possibly because they do not expect to need frequent medical care. Conversely, a policy with a high premium but a lower copay is attractive to individuals who expect to need more medical attention and prefer to pay more upfront to reduce the cost of care at the time of service.
Private insurance is either employment-based, which is subsidized by an employer or union, or direct-purchase insurance that is bought individually. Employment-based insurance is often more comprehensive, including not just health insurance but also retirement plans, employer payments to Social Security, and other benefits like Medicare. On the other hand, direct purchase may not include these additional components.
Health insurance plans typically include a deductible, a copayment (copay), and coinsurance. The deductible is the amount paid out-of-pocket before the insurer pays. A copay is a fixed amount paid for a specific service, while coinsurance is a percentage of the total cost of a service. These elements define the cost-sharing structure of a policy.
In the U.S., to solve adverse selection issues, health insurance is mostly sold through employer groups, which balance risks across many individuals. The Affordable Care Act (ACA) further aimed to mitigate adverse selection and expanded coverage by creating health exchanges and mandating insurance purchase while preventing denial based on preexisting conditions.