The problem of moral hazard Introduction: Insurer can be defined as a company or a person that underwrites the risk associated with the insurance. In other words, it is a company or person that enters into a contract to provide cover in case of damage or loss. Moral hazard problem occurs when people utilize their insurance for health care services that are not needed or essential. Insurance works on the idea that payments shall be made against the random losses. The problem of moral hazard occurs because individual that have taken insurance utilize the same for health services that are not needed since they do not have to make payment for the entire cost of health care service. Insurers can combat the situation of moral hazard by implementing continuous control over the claim experience, audit claims by sampling all claims for review, sharing risk by contract design and evaluation of standards of care on a continuous basis by conducting regular inspections of the workforce.

Healthcare Finance: An Introduction to Accounting and Financial Management

6th Edition

ISBN: 9781567937411

Author: Louis C. Gapenski, Kristin L. Reiter

Publisher: Health Administration Press

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