How Does Adverse Selection Affect The Market For Health Insurance? 
Great question ! Think of it like this . You buy the first house in a neighborhood . If each neighbor is well behaved and keeps up their homes , your happiness level is good ! But if the neighbors are unruly , leave the homes and yards dirty and unkempt , and have regular visits from the police , your happiness level declines . Adverse selection works the same way . If more unhealthy people buy insurance the happiness level of the service providers and insurers goes way down , and costs go way up . If more healthy people buy , than insurers and providers are happy , and costs go down . -LRB- theoretically -RRB- . If you would like more information , please contact me , I 'm happy to help . Thanks for asking ! 