Official Solution (Credit: Manhattan Prep)
The “negative feedback loop” mentioned in the second sentence can best be described as a situation in which
those affected by that situation intentionally created the situation in the first place
opposing parties cannot come to consensus or solve a problem
the affected groups can no longer afford to participate in that situation
companies make decisions based upon business interests as opposed to employee interests
a series of understandable decisions continually escalates in a damaging manner
The second and third sentences state: “In this negative feedback loop, rising insurance premiums cause the healthiest consumers to opt out of their plans, increasing the average risk of the pool. Insurers raise prices to offset that increased risk and the cycle begins again.” The “loop,” then, is a series of steps that form a continuous cycle. The “negative” part has to do with the continually increasing risks and costs: the risk rises when healthier consumers drop out, leading to higher costs, leading to more consumer drop-outs, and so on.
(A) While it is true that the decisions made by consumers and insurance companies do result in the negative feedback loop described in the passage, the parties involved are not “intentionally” creating a negative feedback loop of rising risks and costs. The negative feedback loop is a consequence of decisions made for other reasons.
(B) The passage does not indicate that consensus-building could solve any problem; indeed, the passage does not discuss how this negative feedback loop might be alleviated at all.
(C) The first sentence does say that this negative feedback loop “may [make] insurance prohibitively expensive” but it does not say that insurance definitely will become unaffordable; the only thing we know for sure is that the costs will rise. Further, this choice refers to the affected groups, plural; the insurance companies will still participate, and even the healthier consumers may still be able to afford to participate (but choose not to do so).
(D) The insurance companies do make decisions based upon business interests, but the concept of “employee interests” is not applicable to the negative feedback loop. The negative feedback loop, in this example, describes those who are buying individual insurance, not those who receive insurance through an employer.
(E) CORRECT. The second and third sentences describe a series of reasonable decisions made by each party (healthier consumers opting out to save money, insurers raising premiums because of the increased risk), but the collective set of decisions results in a worsening situation as the cycle continues.