Economic Theory of Health Insurance

The economic theory of health insurance explains how insurance helps manage the risks and costs of health care. It encourages people to use healthcare services more efficiently by spreading the financial risks across many individuals. Insurance reduces the burden of high medical expenses, making healthcare more affordable and accessible. It also influences decisions about when and how much care to seek, addressing issues like moral hazard, where knowing you're insured might lead to more healthcare use than necessary. Overall, it aims to balance individual needs with societal resources, promoting better health outcomes and financial stability.