price elasticity. Furthermore, the lack of suitable data drives many methodological issues that
continue to complicate the estimation.
Nevertheless, our knowledge of how consumers react to price changes in the insurance
market has improved, and the research literature supports a number of general conclusions about
the demand for coverage:
Current tax policy influences the offer of employer-sponsored health insurance
significantly. greater price
Nevertheless, small elasticity than the
firms are less average firm.
likely to offer insurance and have a Estimates of the price elasticity
Among workers with an employer offer of insurance, the responsiveness of take up to price is relatively low: most price elasticity estimates are less than –0.1. This suggests that small changes in employees’ out-of-pocket premiums have little impact on coverage.
on the number
and similarity of insured workers
available can be
options, the price relatively large.
elasticity of In some
circumstances, employees will switch plans in response to pocket premiums. Conversely, unobserved high switching of switching in response to differences in price.
a small increase in out-of- costs depress the elasticity
Price elasticity estimates for individual (nongroup) coverage typically are in the range of –0.2 to –0.6, suggesting that consumers are more sensitive to price changes in the non-group market than in the group market.
The limited evidence available regarding price elasticity among Medicare beneficiaries suggests that elderly beneficiaries are not as price sensitive as younger consumers overall. No research has attempted to estimate price elasticity among disabled beneficiaries.
Few empirical studies have attempted to estimate price elasticity among low-income beneficiaries enrolled in Medicaid or SCHIP. Available evidence, however, suggests that they are very responsive to premiums for coverage, reducing the probability that they will enroll as well as the duration of enrollment.
Looking at Medicaid/SCHIP crowd-out of private coverage, there is no evidence that employers as a whole are less likely to offer coverage when a greater proportion of their employees or dependents are eligible for Medicaid—although small low-wage employers may be less likely to do so. With respect to the effect on private coverage overall, the evidence regarding crowd-out is unclear.