all consumers—even the healthiest ones—to have health insurance. Without the need to guard against

adverse selection (whereby only the riskiest consumers buy insurance) by raising prices, health insurance

companies could provide more reasonable plans to their customers. At the beginning of 2019, the fine for

Access for free at openstax.org
16.2 • Insurance and Imperfect Information 401

not having health insurance was eliminated.

• Each state is required to have health insurance exchanges, or utilize the federal exchange, whereby

insurance companies compete for business. The goal of the exchanges is to improve competition in the

market for health insurance.

• Employer mandate: All employers with more than 50 employees must offer health insurance to their

employees.

The Affordable Care Act (ACA) is funded through additional taxes that include:

•

Increasing the Medicare tax by 0.9 percent and adding a 3.8 percent tax on unearned income for high

income taxpayers.
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