D. INDIVIDUAL DEMAND IN THE NONGROUP MARKET
As not all uninsured have access to an offer of coverage from employers, a number of public
policy proposals have focused on subsidizing coverage in the nongroup market. In general, these
proposals would offer tax credits or other price incentives to stimulate the purchase of individual
health insurance. Estimates of the potential impact of these proposals rely on an understanding
of consumer response to a change in the price of individual coverage.
Range of Estimates
Relatively few studies have estimated the price elasticity of demand for individual (or non-
group) coverage. Each of these studies is based on observation of a different population group—
for example, self-employed workers without access to group coverage versus uninsured
individuals—but collectively they suggest that the elasticity of demand for individual coverage is
generally in the range of –0.2 to –0.6 (Table III.D).
Marquis and colleagues were among the first researchers to estimate price elasticity in the
non-group insurance market. Based on responses to hypothetical insurance offers, Marquis and
Buchanan (1992) estimated a price elasticity of –0.5 among families. Marquis and Long (1995)
linked a price list from a major insurer in the nongroup market to individuals (based on
residence, age, and gender) and estimated a price elasticity of demand in the –0.3 to –0.6 range
among working families without group coverage. Marquis et al. (2004) constructed a premium
that would likely to be paid by a standardized population based upon the actual premiums and
coverage offered by the three largest individual insurers in the state of California—and again
estimated a price elasticity in the range of –0.2 to –0.44 among families without group coverage,
depending on the data source used.