Affordability of health insurance: Do assets and net wealth explain the demand for health insurance better than income?
- Presenter:
Chair: TBA; Discussant: TBA Mon June 5, 2006 13:45-15:15 Room 313
Understanding the affordability of coverage is important for evaluating the role of policy in reducing the number of uninsured workers. We study worker health insurance take-up and coverage decisions using data from the Medical Expenditure Panel Survey (MEPS) from 1997 to 2003. Unlike previous studies which control only for current income, we include information on the presence and value of family-level assets such as home ownership, vehicles, savings accounts, stocks, bonds, retirement accounts, as well as liabilities, to estimate the effect of net wealth on insurance purchase decisions. Unlike most studies which focus on “worker” take-up, we also take into account the availability of insurance offers through the spouse’s employer in estimating enrollment decisions of workers and their families.
We estimate worker demand for employer sponsored health insurance as a function of the premium as well as worker, family, employer and plan characteristics. We use two approaches to deal with the lack of premium data for workers who decline coverage. The first approach uses a sub sample in MEPS from 1997-1999 with linked data from the Household Component (HC) and the Insurance Component (IC) which is a survey of employers. Although the HC-IC link sample is not nationally representative, it contains data on the premiums for takers and decliners as well as the availability of choice of health plans, and types of plans offered. The second approach uses simulated premiums from the Insurance Component List Sample. Using the nationally representative sample of employers in the MEPS-IC, we estimate average plan premiums as a function of predictor variables available on both the employer and household surveys, including location (state, MSA), firm size, industry, and plan types offered. We then use this model to predict premiums for workers in the household survey.
Among adults living in families with health insurance offers in 2001 and 2002, 7.6 percent did not take up private insurance. As expected, probability of take up declined with income: 8.6 percent of adults with middle income, 19.9 percent of adults with low income, and 32.4 percent of poor and near poor adults did not take up private insurance. (Bernard and Selden, 2005) Preliminary work based on this sample, suggests that assets and net wealth play a significant role in insurance coverage decisions. Controlling for income, adults who did not take up health insurance were significantly less likely to have assets. For example, among poor and low income adults, the decliners were less likely to own homes (46% vs. 54%), less likely to have cars (78% vs. 86%), less likely to have checking accounts (37% vs. 51%), less likely to have stocks (1% vs. 5%), and less likely to have individual retirement accounts (13% vs. 22%). Research using affordability thresholds based on income has shown that health insurance was affordable to between 25% to 75% of the uninsured in 2000. (Bundorf and Pauly, 2002) Our preliminary results suggest that in explaining health insurance purchase decisions, affordability thresholds based solely on income may be inadequate.
