Health Limitations and the Determinants of Health Insurance Coverage

Abstract

This paper uses data from the 2006 Behavioral Risk Factor Surveillance (BRFSS) System and information on state health insurance regulation tabulated by the Center for Affordable Health Insurance (CAHI) to examine the impact of health limitations on the factors determining whether a working-age adult has health insurance. Separate models are estimated for a sample of individuals with health limitations and a sample of individuals with no health limitations. The models are estimated with two different sets of regulatory variables; a composite regulatory index and a small-group underwriting variable. The difference in coefficients between the healthy and unhealthy sample appear larger for the socioeconomic variables than for the regulatory variables. Results pertaining to the impact of regulation on health coverage appear to be small and sensitive to the choice of regulatory variable. There are at least two reasons why the estimated impact of state regulation on insurance coverage is small. First, 55% of workers who receive health insurance are covered by a self-insured plan, which is exempt from state insurance. This statistic likely understates the percent of health insurance not subject to state regulation because state regulation is generally confined to firms with 50 or fewer employees. Second, empirical proxies of the stringency of state health insurance regulation do not consider a number of important regulatory features including differences in rate-band regimes, underwriting standards, and enforcement procedures. Results from empirical studies of the determinants of insurance coverage (including this study) are only applicable to the current health insurance environment where individuals obtain health insurance through their employers. This type of empirical study will have little relevance to an environment where most people obtain their health insurance through the individual market rather than through the group market.

Keywords: health insurance, coverage, regulation

JEL Classification: I10, I11, I18