Working Paper: NBER ID: w11677
Authors: M. Kate Bundorf; Bradley Herring; Mark Pauly
Abstract: While many believe that an individual's health plays an important role in both their willingness and ability to obtain health insurance in the employment-based setting, relatively little agreement exists on the extent to which health status affects coverage rates, particularly for those with lower incomes. In this paper, we examine the relationship between health risk and the purchase of group health insurance and whether that relationship differs by a person's income and whether they obtain coverage in the small, medium, or large group market. Using the panel component of the 1996-2002 Medical Expenditure Panel Survey (MEPS), we find that health risk is positively associated with private health insurance across the different markets, and that this positive relationship is stronger for low and middle income people, particularly in the large group market. Our results are consistent with the existence of adverse selection in the group market in the form of low rates of coverage among low risks due to an absence of risk rating of premiums. We conclude that pooled premiums for low risks, particularly those with low incomes, may represent a more important financial barrier to coverage in voluntary group insurance than high premiums for high risks.
Keywords: health insurance; health risk; income; employment-based coverage
JEL Codes: I1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low-income individuals (I32) | pooled premiums as a barrier to insurance (G22) |
| private health insurance coverage (low-income individuals) (I13) | high premiums as a deterrent (G52) |
| health risk (I12) | private health insurance coverage (I13) |
| health risk (I12) | private health insurance coverage (low and middle-income individuals) (I13) |
| health risk (I12) | private health insurance coverage (large group market) (I13) |
| health risk (I12) | private health insurance coverage (high-income individuals) (I13) |
| health risk (I12) | private health insurance coverage (small group market) (I13) |
| health risk (I12) | private health insurance coverage (large group market) vs. small group market (I11) |