Final answer:
A risk pool is established when health care coverage costs are based on employees' status, age, sex, and occupation, which helps insurers manage adverse selection and sustain the insurance market.
Step-by-step explanation:
When the cost of health care coverage is determined by factors like employees' status, age, sex, and occupation, a risk pool is created. A risk pool is a system in health insurance markets that helps to distribute the costs and risks associated with providing coverage. Insurance companies utilize risk pools to manage the adverse selection issue. Adverse selection occurs when insurance buyers, who have more knowledge about their health risks than the insurance company, significantly affect the dynamics of the market. To combat this, and maintain a stable risk pool, healthy individuals' participation is crucial. This concept is important for the sustainability of health insurance systems, as a predominance of chronically ill participants can lead to higher premiums and potentially cause an insurance death spiral.