General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Under guaranteed-issue health coverage, applicants cannot be turned down for health reasons. The principal underwriting concern this creates is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Guaranteed issue removes medical underwriting as a gate, so higher-risk individuals are more likely to apply and enroll than lower-risk individuals - a classic adverse selection pattern. If the pool's average risk rises, claims rise and premiums must rise to match, which can drive healthier people away and worsen the spiral. Insurers and regulators address this through open enrollment windows, penalties, subsidies, and risk-adjustment mechanisms.
Why the other options are wrong
- B) The concern is a sicker pool, not a healthier one.
- C) Guaranteed issue does not remove moral hazard; dishonest claim behavior can still occur.
- D) Premiums do not automatically fall; they are set to reflect the pool's expected claims, which rise under adverse selection.
Memory hook
Guaranteed issue -> sicker applicants flood in -> premiums climb. Adverse selection is the spiral.