Final answer:
The exclusion of coverage for injuries sustained during felony commission on health insurance plans addresses moral hazard by discouraging illegal and risky behaviors, which helps to maintain a balance in the insurance risk pool and prevent an insurance death spiral.
Step-by-step explanation:
The best reason that the 2016-2017 Student Injury and Sickness Health Insurance Plan excludes coverage during the commission of a felony, as per 'Exclusions and Limitations' #1, is likely to address the issue of moral hazard. Moral hazard occurs when individuals engage in riskier behaviors because they are insulated from the consequences due to insurance. By excluding coverage for injuries sustained in the commission of a felony, the insurance plan discourages illegal and risky behaviors, thus preventing misuse of the insurance funds and potential increases to the cost of premiums for the rest of the insured population. This is important because a health insurance exchange relies on a balance of healthy to sick individuals to prevent what is known as an insurance death spiral, where insurance becomes unaffordable due to a high number of claims and healthy individuals leaving the pool.