"The article you linked to describes how insurance companies take steps to avoid adverse selection:" --  Are you serious?  Duh: Of COURSE they do!  That's the point: Because they may try- and then fail- at fully knowing someone real risks, they spread that cost around their entire pool of policy holders, knowing full well they can't!  It incentivizes healthy people to get coverage as young and healthy as possible, and opens the pool of applicants and risk to be as large as possible-- it drives prices DOWN for everyone!!  "Whoops!" is right!