How Does Adverse Selection Affect The Market For Health Insurance? 
Adverse selection is the primary driver behind the need for the Affordable Care Act to impose a penalty for not purchasing coverage , and for the intense media scrutiny surrounding the demographics of people enrolling through state exchanges . Adverse selection occurs when people expecting to use the healthcare system enroll in health insurance plans at a far higher rate than healthier people . Somebody has to pay more in premium than they receive in benefits - or the premiums will have to rise to cover the sicker population - which in turn causes more healthy people to opt out - which causes premiums to rise further - which in turn ... . 