Describe the two key consequences, to the health insurance industry, ofthis fact that the companies know less about individuals’ health than the individuals who buy the policiesdo.

1.Country A has a single-payer health care system and Country B has a system of socialized medicine.The residents of Country A have a longer life expectancy at birth, longer life expectancy at age 65, a lowerinfant mortality rate, and a lower risk of dying from cancer before age 75 than the residents of Country B.Assuming that the data described above is accurate (that is, there are no data collection problems leadingto false differences between the two countries), is it safe to assume that Country A’s system of health careis superior to Country B’s system, and leads to better health outcomes? 2. The problem of asymmetric information is a major issue in the market for health insurance. Insurancecompanies must be able to predict the amounts they will have to pay out to policyholders in order to setpremium levels that are neither too low to cover costs or too high to be acceptable to customers — butthe insurance companies don’t have the same level of knowledge about customers’ state of health thatthe customers have themselves. Describe the two key consequences, to the health insurance industry, ofthis fact that the companies know less about individuals’ health than the individuals who buy the policiesdo.

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