Health insurance is a system that pools risk by paying premiums or taxes to cover the cost of medical services. This article examines the demand for health insurance among uninsured Americans.
Uninsured adults are more likely to be men, black or Hispanic, and less likely to have children. Additionally, they are more likely to fall into the coverage gap, meaning their income is too high for Medicaid but too low for marketplace subsidies.
In simulation models, a crucial parameter is the price elasticity of demand for health insurance to determine the effects of suggested policy changes. It is also a critical input to public policy decisions. However, estimating price elasticity is difficult. It is because the actual prices paid are inherently endogenous. The decision to purchase insurance is affected by various factors, including the number and type of plans available in the individual market and variations in actuarial value. Establishing a structural model that captures all the linkages between potential subscribers’ pricing, benefits, and participation decisions is impossible. Previous studies of price elasticity use various techniques, including linking a list of prices in the individual insurance market to individuals by residence and age; responses to hypothetical insurance offers; reservation prices based on expected health care spending; and a sliding scale subsidy schedule. However, there are better methods for capturing the complexity of real-world coverage choices. For example, a person with employer-sponsored coverage may decide to drop or retain that coverage in response to a change in her subsidy schedule, or she may choose to join a new public program.
The vast majority of uninsured Americans get their health insurance through the workplace. This report uses new data to explore the willingness to pay for health insurance in households that do not have employer-provided coverage. The results indicate that household willingness-to-pay values are higher than public and private healthcare costs for most uninsured families. A policy initiative that reduces the cost of private health insurance could potentially increase take-up rates. The number of nonelderly Americans who are uninsured has declined slightly since 2019. This decrease is due primarily to increases in Medicaid and non-group coverage, which have offset declines in the employer-sponsored range. Among those who remain uninsured, the most common reason cited is that they cannot afford coverage. A key feature of this analysis is that the survey includes an item asking respondents to report their expectations for future spending on healthcare. It allows us to directly compare empirical distributions of past expenditures with subjective probability distributions of expected spending, estimating an individual’s “belief premium.”
Several studies have documented the patterns of coverage among workers. Uninsured workers tend to be employed in smaller firms in the agriculture, construction, and trade industries; they are also more likely to work part-time and earn below $10 per hour. They are also more likely to be poor and have been denied health insurance coverage. As a result of policies put in place during the COVID-19 pandemic to stabilize coverage, the number of nonelderly Americans without health insurance dropped significantly from 2019 to 2021. The decline in the uninsured rate was driven by increases in Medicaid and non-group marketplace coverage that offset losses in employer coverage. The coverage gains were larger among Hispanic people, those in working families, and people living below the poverty line. But despite the substantial coverage gains, the cost of health insurance remains a significant barrier to enrollment. The most common reason cited by people for being uninsured in 2021 was that it was too expensive. Unsurprisingly, the ACA has highly progressive subsidy schedules, and healthy individuals are more price-sensitive than those with lower incomes. Moreover, these individuals are unlikely to choose to enroll if their subsidies are reduced. Therefore, a more robust understanding of the demand for health insurance is needed to inform policy initiatives to expand access to the market.
In 2021, 27.5 million nonelderly people were uninsured, a decline of nearly 1.5 million from 2019. This change was driven by increases in Medicaid and non-group coverage, which offset declines in employer-sponsored coverage. These gains were more pronounced among low-income individuals and those in working families. Coverage also improved for Hispanics and people with pre-existing conditions, who are more likely to encounter challenges paying medical bills. Changes in employment-based coverage drove the increase in enrollment in public and private insurance, direct purchase plans on the ACA marketplaces, and provisions of the Families First Coronavirus Response Act that prevent states from disenrolling individuals from Medicaid during the pandemic. The drop in uninsured is also likely due to broader economic and labor market developments, including wage gains and the extension of enhanced Marketplace subsidies for another three years. Workers in firms with more generous health coverage have higher sponsorship, eligibility, and take-up rates. This finding suggests that anti-discrimination laws effectively ensure workers who want health coverage have access to it. It is also important to understand the factors that determine the demand for health insurance, which can vary across industries and individual characteristics. For example, employees of smaller companies are less likely to receive offers of health insurance from their employers. However, they are more likely to take up an offer than employees of larger companies.
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