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Health Risk, Income, and Employment-Based Health Insurance

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  • 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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11677.

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Date of creation: Oct 2005
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Publication status: published as M. Kate Bundorf & Bradley Herring & Mark V. Pauly, 2010. "Health Risk, Income, and Employment-Based Health Insurance," Forum for Health Economics & Policy, Berkeley Electronic Press, vol. 13(2).
Handle: RePEc:nbr:nberwo:11677

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  1. Bradley Herring & Mark V. Pauly, 2006. "The Effect of State Community Rating Regulations on Premiums and Coverage in the Individual Health Insurance Market," NBER Working Papers 12504, National Bureau of Economic Research, Inc.
  2. Cardon, James H & Hendel, Igal, 2001. "Asymmetric Information in Health Insurance: Evidence from the National Medical Expenditure Survey," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 408-27, Autumn.
  3. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 630-49, November.
  4. Amy Finkelstein & Kathleen McGarry, 2003. "Private Information and its Effect on Market Equilibrium: New Evidence from Long-Term Care Insurance," NBER Working Papers 9957, National Bureau of Economic Research, Inc.
  5. Jonathan Gruber & Ebonya Washington, 2003. "Subsidies to Employee Health Insurance Premiums and the Health Insurance Market," NBER Working Papers 9567, National Bureau of Economic Research, Inc.
  6. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug..
  7. Gruber, Jonathan & Washington, Ebonya, 2005. "Subsidies to employee health insurance premiums and the health insurance market," Journal of Health Economics, Elsevier, Elsevier, vol. 24(2), pages 253-276, March.
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Cited by:
  1. repec:dgr:uvatin:0000084 is not listed on IDEAS
  2. Jonneke Bolhaar & Maarten Lindeboom & Bas van der Klaauw, 0000. "A Dynamic Analysis of the Demand for Health Insurance and Health Care," Tinbergen Institute Discussion Papers 08-084/3, Tinbergen Institute.
  3. Hope Corman & Anne Carroll & Kelly Noonan & Nancy E. Reichman, 2006. "The Effects of Health on Health Insurance Status in Fragile Families," NBER Working Papers 12197, National Bureau of Economic Research, Inc.
  4. Robert Helms, 2006. "Health Reform in the US," PharmacoEconomics, Springer, Springer, vol. 24(2), pages 5-14, December.
  5. Hope Corman & Anne Carroll & Kelly Noonan & Nancy E. Reichman, 2006. "The Effects Of Health On Health Insurance Status In Fragile Families," Working Papers, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing. 928, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing..
  6. repec:dgr:uvatin:2008084 is not listed on IDEAS
  7. Stanciole, Anderson, 2007. "Health Insurance and Life Style Choices: Identifying the Ex Ante Moral Hazard," IRISS Working Paper Series, IRISS at CEPS/INSTEAD 2007-10, IRISS at CEPS/INSTEAD.

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