Obligations of the employer and the government in insuring the two populations of individuals described in the scenario
It is the role of the employer and the government to ensure that individuals who are healthy and those with chronic diabetes are provided for with the best health insurance policies. These health insurance policies will cover up for the losses that one receives due to sickness and also from medical expenses. According to Pilzer and Lindquist (2014), affordable coverage on health should be given to employees otherwise they will be penalized. The employer is obliged to ensure that all the workers are given health benefits. Nevertheless, the employer should give its employees who are 50 years and above an equal share of responsibility. It is also important for the employer to provide a paid leave and health benefits to individuals who are 40-50years and have chronic diabetes. The government also is obliged to ensure that all individuals have a right to health care and should support initiatives and businesses of people by providing better health care systems (The Common Wealth Fund, 2016).
The impact of moral hazard and adverse selection on these insurance provisions
Moral hazard and adverse selection id described as situations in which one party tends to be disadvantaged. Einav, Finkelstein and Cullen (2015), argue that adverse selection happens as a result of a lack of asymmetric information which moral hazard occurs when there is lack of asymmetric information. Under adverse selection, accurate information is provided to the employer by one party as compared to the other party (Boncz et al., 2015). In this case, the party that has lesser information will be disadvantaged as compared to the one with more information. In the scenario, individuals aged between 40-50 years and have chronic diabetes will disadvantage those workers with no known health conditions as the two groups will have to pay equal health premiums. The insurance company does not have the capacity to distinguish who is more severe than the other. Individuals who want to pay fewer premiums and have chronic diabetes can tell the insurance company they do not suffer from the illness to evade paying higher premiums. On the other hand, moral hazard occurs when a party provides wrong information so as to evade risk. In this case, the group of workers with no known health conditions can decide to take the health insurance to cover them on illnesses such as diabetes. However, these individuals aged 20-30 expose themselves to behaviours such as excess alcohol and smoking which puts the company at high risk of having several employees with illnesses (Einav, Finkelstein & Cullen, 2015).
The type of health insurance policy the employer should design and provide for its employees
Research conducted by Getzen (2015) indicates that more than 300 people in the US have a form of health care insurance which could either as a worker or a self-employed person. Individuals who purchase health insurance are less than 10%. The Government in the US provides health care insurance to one-third of the population using healthcare facilities such as Medicare and Medicaid (The Common Wealth Fund, 2016). Therefore, the employer should provide a private health care insurance policy to its employees. This is because private insurance policies enable an employee to save money, it’s always available so long as the employees pay their premium, the employee has the capacity to get coverage for what the employee has not included in their insurance and it also enables one to choose their own costs. Therefore, it is appropriate for the employer to enable its employees to use a private health insurance because it saves them money and has a wide coverage.
Pilzer, P. Z., & Lindquist, R. (2014). The end of employer-provided health insurance: Why it's good for you and your company. John Wiley & Sons.
The Common Wealth Fund (2016). International Health Care Systems. Retrieved from, https://intl-cmwf.s3-website-us-east-1.amazonaws.com/about/
Einav, L., Finkelstein, A., & Cullen, M. (2015). Moral hazard in health insurance: Do dynamic incentives matter? Review of Economics and Statistics, 97(4), 725-741.
Pettinger T., (2016). Adverse selection explained. Retrieved from, https://www.economicshelp.org/blog/glossary/adverse-selection/
Boncz, I., Evetovits, T., Dózsa, C., Sebestyén, A., Gulácsi, L., Ágoston, I., ... & Getzen, T. E. (2015). The Hungarian Care Managing Organization Pilot Program. The value in Health Regional Issues, 7, 27-33.