When the cost of health insurance is relatively low, such as in an employer-subsidized plan, most people to whom it is made available will opt in (take the insurance). But when the cost of health insurance is relatively high, the choice is not as easy to make. Often those who opt in will be more likely to have immediate health care needs and hence be more expensive to insure than the population as a whole. Thus, as Kay Lazar wrote in a June 30, 2010, Boston Globe article titled Short-Term Insurance Buyers Drive up Cost in Mass., adverse selection is a factor in increased health insurance costs, and the higher the costs, the higher the premiums, which means even more individuals will forgo coverage.

The traditional techniques used by insurers to mitigate adverse selection risk have included denying coverage to or charging higher premiums for individuals with preexisting health conditions or excluding those conditions from the individuals policy. Although necessary for the current health care insurance system to remain viable, these techniques are one reason health insurance is viewed in a negative light by many consumers. Now, however, health care reform (discussed in section 3.8) eliminates or limits most of the traditional adverse selection risk management techniques. Instead, the legislations aim is to maximize the number of healthy people who obtain coverage by offering subsidies to lower-income Americans and mandating penalties for those who refuse to take coverage. This individual mandate approach is intended to put almost everyone into the insurance pool, thereby eliminating adverse selection. (Taken from For Your Consideration on page 60 in your text)

What do you think? Will the individual mandate eliminate adverse selection?