Final answer:
The common model being asked about is likely an HMO, where health care providers receive a set payment per patient, contrasting with the fee-for-service model where providers are paid based on the individual services they perform. Both models face challenges like adverse selection and moral hazards.
Step-by-step explanation:
The student is asking about the most common model where the administrator of a plan contracts with various dental offices that typically operate on a fee-for-service basis. This is contrasted with health maintenance organizations (HMOs), where providers are reimbursed per patient rather than per service, which shifts the focus from the quantity of services to the overall care of the patient. Fee-for-service encourages more services provided, as payment is tied to the quantity and complexity of the services rendered.
HMOs, on the other hand, aim to reduce costs by having a set fee per patient, which can sometimes lead to an under-provision of services, creating a moral hazard issue. Adverse selection is a challenge that both models face, which occurs when there is asymmetric information between insurance buyers and the insurance company, potentially leading to a mismatch in insurance pricing and the actual risk profile of insured individuals.