The demand for health insurance coverage by low-income workers: can reduced premiums achieve full coverage?

Health Services Research, Oct, 1997 by Michael Chernew, Kevin Frick, Catherine G. McLaughlin

The results using employee contribution as the measure of price confirm many commonly held beliefs. Salaried workers are more likely to participate; earnings are positively related to the probability of participation even within this sample of low-income workers. However, we find no relationship between age and probability of participation - but aggregate measures of age such as ours might miss such a relationship.

Table 2: Probit Estimates of Participation in Their Employer's Plan
by Eligible Workers with No Other Source of Coverage (t-statistics
in parentheses)

                                (1)           (2)

Constant                     -1.743514     -0.789532
                               -(2.27)       -(1.05)

Total premium                0.005355
                               (1.65)

Total premium(2)            -7.43E-06
                              -(1.92)

Employee contribution                      -0.014387
                                             -(2.94)

Employee contribution(2)                    6.33E-05
                                              (2.12)

Age 25-39                    0.089224       0.031444
                               (0.38)         (0.14)

age [greater than] 40        0.057758       0.026231
                               (0.19)         (0.09)

Tucson                      -0.325174      -0.174322
                              -(0.76)        -(0.41)

Tampa                       -0.689350      -0.612991
                              -(2.09)        -(1.79)

Flint                        0.371408       0.272836
                               (0.65)         (0.47)

Denver                       0.142026      -0.108859
                              -(0.39)        -(0.30)

Cleveland                    0.415107       0.460505
                               (1.09)         (1.18)

Pittsburgh                   1.090519       1.057668
                               (1.93)         (1.77)

Male                         0.014342       0.020482
                               (0.06)         (0.09)

Salaried                     0.689841       0.628882
                               (2.49)         (2.34)

Income                       0.009398       0.008615
                               (3.82)         (3.47)

Part-time worker             0.460794       0.458318
                               (1.08)         (1.16)

N                                 332            332

An alternative explanation for the existence of these nonparticipants is that these individuals prefer to be uninsured, even when the policy is free. While certainly one could rely on a variety of "irrationalities" to explain this preference, such as the belief on the part of these individuals that they will never want care, this preference may be rational. For example, insurance policies may contain certain cost-sharing provisions that would not be waived by the provider, whereas uninsured individuals may be eligible for care in cases of emergency at no out-of-pocket cost and, in many instances, are eligible for publicly provided non-emergent care with little or no co-pay.(20) This interpretation is consistent with the findings of Thomas (1994). It may also be the case that some individuals perceive administrative costs to enrolling or suffer from information deficiencies that lead to lower participation rates.