If insurance companies are required to offer coverage to all interested people, economists argue that premiums for each person will be increased. Assume that the insurance market is perfectly competitive. What is the major reason for raising the premium?
1 - Adverse selection: less healthy people join the pool of insured and hence increase the risk and the premium.
2 - Moral hazard: most people will start taking more risks in terms of their health.
3 - The insurance companies take advantage of the increased demand and collude to set higher prices.
4 - Insurance industry will become monopolized by one large company and will be taken over by the government.
5 - Consumers demand higher quality healthcare services, and are willing to pay more.