A non-contributory health insurance plan helps the insurer avoid:

A non-contributory health insurance plan is one where the employer pays the entire premium without requiring any contribution from employees. One of the significant advantages of this type of plan is that it helps the insurer mitigate adverse selection.

Adverse selection occurs when there is an imbalance in the risk pool, often leading to a higher proportion of individuals who are more likely to make claims, such as those with pre-existing health conditions. This situation typically happens in voluntary plans, where individuals can choose whether to participate in the insurance plan based on their health status. By offering a non-contributory plan, the insurer encourages broader participation among employees, including healthier individuals who may not otherwise opt into coverage if they had to contribute financially. This broader participation helps create a more balanced risk pool, reducing the likelihood of adverse selection, where healthy individuals opt out, leaving a pool comprised mostly of high-risk individuals.

In summary, a non-contributory health insurance plan effectively aids insurers in managing the risk of adverse selection by ensuring a more diverse and representative group of insured individuals.