Adverse Selection

8 Health Care Glossary Items #2

Adverse selection is the bane of insurance companies. It is why they prefer to insure large groups and not to insure individuals. It is also one of the primary reasons that progressives believe that it is the government's responsibility to provide health insurance.

The principal of adverse selection is that the demand for insurance will be highest among those who will need the insurance the most. In other words, the sick, or those most likely to get sick are more likely to buy health insurance than those whose risk of illness isn't as high.

Insurance companies fight adverse election by raising premiums or denying coverage to those most likely to collect through the process known as underwriting.