The correct answer is: B. It may lead to abuse of health insurance cover.
Moral hazard is a situation in which a person’s actions are influenced by the fact that they are insured against the risk of loss. In the context of health insurance, moral hazard can lead to people seeking unnecessary medical care or engaging in risky behavior because they know that they will not have to pay the full cost of the care.
Community rating is a system of health insurance pricing in which all individuals within a given geographic area are charged the same premium, regardless of their health status. This system is designed to prevent adverse selection, which is a situation in which only people with high health risks purchase health insurance.
Risk pooling is a system of health insurance in which the costs of medical care for a group of people are shared. This system is designed to spread the risk of high medical costs across a large number of people.
A. It may lead to community rating is incorrect because moral hazard does not necessarily lead to community rating. In fact, moral hazard can lead to adverse selection, which would make community rating more difficult to implement.
C. Moral Hazard in health insurance would mean adverse selection is incorrect because moral hazard and adverse selection are two different concepts. Moral hazard is a situation in which a person’s actions are influenced by the fact that they are insured against the risk of loss. Adverse selection is a situation in which only people with high health risks purchase health insurance.
D. Risk pooling will be there in moral hazard is incorrect because moral hazard does not necessarily lead to risk pooling. In fact, moral hazard can lead to adverse selection, which would make risk pooling more difficult to implement.