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TABLE III.D

Study

Population

Demand Measure

Price Variation

Elasticity Estimate

Marquis and Buchanan (1992)

All families

Probability of being covered by individual insurance

Hypothetical insurance offers with different levels of premium

–0.5

Gruber and Poterba (1994)

Self-employed families

Probability of being covered by individual insurance

Tax subsidy

–0.34 to –0.69

Marquis and Long (1995)

Families without group offer

Probability of being covered by individual insurance

Variation in premium quotes across locations

–0.3 to –0.6

Marquis et al. (2004)

Families without group offer in California

Probability of being covered by individual insurance

Constructed premiums based on quotes from 3 largest insurers in CA

–0.2 to –0.4

Congressional Budget Office (2005)

Employees without group offer

Probability of being covered by individual insurance

Imputed premiums

–0.57

SUMMARY OF RECENT STUDIES ON THE PRICE ELASTICITY OF DEMAND FOR HEALTH INSURANCE—INDIVIDUAL DEMAND IN THE NONGROUP MARKET

Gruber and Poterba (1994) used the Tax Reform Act of 1986 (which reduced the after-tax

price of individual insurance for the self-employed) as a natural experiment to measure the price

response among families of self-employed workers. They estimated semi-elasticities (that is, the

number of points that the insured percentage of the population would change if the after-tax price

of insurance rose by 1 percent) in the range of –0.34 to –0.69, depending on of the econometric

specification.

The Congressional Budget Office (CBO 2005) used the tax deductibility of premiums for

self-employed individuals as well as the effect of state-level premium compression due to

community

rating

regulations

to

impute

individual

premiums.

This

approach

produces

an

elasticity estimate of –0.57 among single workers without access to group insurance. They also

estimated a “take-up” elasticity of –0.084 (which translated to a 4.2 percent reduction in the

uninsured in response to a 50-percent premium subsidy)—a magnitude consistent with that

26

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