Workers on the Margin: Who Drops Health Coverage when Prices Rise?

• Published in: Inquiry (Chicago) Vol. 47; no. 1; pp. 33 - 47
• Main Authors: Okeke, Edward N., Hirth, Richard A., Grazier, Kyle
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA Excellus Health Plan, Inc 01.04.2010; SAGE Publications; SAGE PUBLICATIONS, INC; SAGE Publishing
• Subjects: Adult; Age Factors; Costs and Cost Analysis; Employees; Employees' benefit plans; Employer contributions; Employer provided health insurance; Female; Financing, Personal - economics; Financing, Personal - statistics & numerical data; Health Benefit Plans, Employee - economics; Health Benefit Plans, Employee - statistics & numerical data; Health care economics; Health insurance; Health Services Needs and Demand - economics; Health Services Needs and Demand - statistics & numerical data; Humans; Insurance coverage; Insurance Coverage - economics; Insurance Coverage - statistics & numerical data; Insurance premiums; Male; Marital status; Middle Aged; Models, Econometric; Price elasticity; Prices; Salary; Sex Factors; Single status; Socioeconomic Factors; Studies; Uninsured persons; Universities; United States > US
• ISSN: 0046-9580; 1945-7243
• DOI: 10.5034/inquiryjrnl_47.01.33

We revisit the question of price elasticity of employer-sponsored insurance (ESI) takeup by directly examining changes in the take-up of ESI at a large firm in response to exogenous changes in employee premium contributions. We find that, on average, a 10% increase in the employee's out-of-pocket premium increases the probability of dropping coverage by approximately 1%. More importantly, we find heterogeneous impacts: married workers are much more price-sensitive than single employees, and lower-paid workers are disproportionately more likely to drop coverage than higher-paid workers. Elasticity estimates for employees below the 25th percentile of salary distribution in our sample are nearly twice the average.