Question

The individual mandate in the Affordable Care Act is intended to?

1) Provide incentives to overcome a negative externality and buy health insurance
2) Overcome a moral hazard problem
3) Solve the problem of unravelling of the health insurance market due to the lemons problem
4) All of the above

Answer 1

The individual mandate in the Affordable Care Act is intended to provide incentives to overcome a negative externality and buy health insurance.

Step-by-step explanation:

The individual mandate in the Affordable Care Act is intended to provide incentives to overcome a negative externality and buy health insurance.

The individual mandate requires all individuals, who do not receive health care through their employer or through a government program, to have health insurance or pay a fine. By requiring everyone to have health insurance, the individual mandate aims to reduce the adverse selection problem and keep prices down.

Without the need to guard against adverse selection by raising prices, health insurance companies can provide more reasonable plans to their customers.