Affordable Care Act (AKA Obamacare), which was passed by Congress in 2010, is designed to provide health insurance to those who are not covered through their jobs, who are unemployed and who have been denied health insurance in the past due to preexisting medical conditions. It these people do not sign up for health insurance in the marketplace during the enrollment period (in November), they will have to pay tax penalty $325 per adult and $162.50 per child (up to $975 for a family) or 2% of the household income, which is greater. Yet, 5.6 million adults opted to pay tax penalty instead of buying health insurance (most of these people are young and healthy individuals) mainly due to high premiums and deductibles.

Why do you think both premiums and deductibles have increased rapidly in the last few years? Why are insurance companies pulling out the health plan example (e.g. Arizona has one insurance company participating in ACA)? Please explain your reasoning using the adverse selection and moral hazard.