Moral hazard is the risk that a health insurer will not pay for covered services. What is the correct perspective on this statement?

The statement that moral hazard is the risk that a health insurer will not pay for covered services is not accurate. Rather, moral hazard refers to the phenomenon where the behavior of the insured party may change as a result of having insurance coverage. When individuals are insulated from risk by insurance, they may engage in riskier behavior or overutilize medical services because they do not bear the full costs of their actions.

For example, a person with health insurance might seek unnecessary medical treatments or visits because they are not fully responsible for the expenses associated with those decisions. Thus, the concept of moral hazard is more about the change in behavior post-insurance, not about the insurer’s willingness to pay for covered services.

Understanding moral hazard is important in health care finance, as it impacts how insurance plans are structured and the way costs are managed. Insurers often employ various strategies to mitigate moral hazard, such as requiring copayments or setting limits on certain types of care.

This highlights why the correct perspective on the initial statement is that it is false, as the definition of moral hazard does not align with the risk of insurers not covering services.