Health Risk, Income, and Employment-Based Health Insurance

44 Pages Posted: 13 Dec 2005

See all articles by M. Kate Bundorf

M. Kate Bundorf

Stanford University - Department of Health Research and Policy; National Bureau of Economic Research (NBER)

Bradley Herring

Emory University - Department of Health Policy and Management

Mark V. Pauly

University of Pennsylvania - Health Care Systems Department; National Bureau of Economic Research (NBER)

Date Written: October 2005

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.

Suggested Citation

Bundorf, M. Kate and Herring, Bradley and Pauly, Mark V., Health Risk, Income, and Employment-Based Health Insurance (October 2005). NBER Working Paper No. w11677. Available at SSRN: https://ssrn.com/abstract=819838

M. Kate Bundorf (Contact Author)

Stanford University - Department of Health Research and Policy ( email )

Stanford, CA 94305
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Bradley Herring

Emory University - Department of Health Policy and Management ( email )

1518 Clifton Road NE
Atlanta, GA 30322
United States

Mark V. Pauly

University of Pennsylvania - Health Care Systems Department ( email )

3641 Locust Walk
208 Colonial Penn Center
Philadelphia, PA 19104-6358
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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