Wealth, Income, and the Affordability of Health Insurance

1. Wealth, Income, and the Affordability of Health Insurance Didem Bernard, Ph.D. Jessica Banthin, Ph.D. and William Encinosa, Ph.D.

2. The Affordability Puzzle(adults 21-64) • Many “unafforders”---the poor who appear to be unable to afford insurance--- do indeed purchase insurance • 20.6 % of those below the poverty line had private insurance in 2006 (3.8 million) • Many “afforders” are uninsured • 20.7 % of those above the poverty line were uninsured in 2006 (32.5 million)

3. Research Questions • What is the difference in wealth between insured and uninsured families? • How much better can we predict demand for insurance using asset and wealth data?

4. Data • Medical Expenditure Panel Survey (MEPS) • Nationally-representative sample of households • Full-year files for 2002 & 2003 • Detailed information on health insurance status, employment, health insurance offers, private and public coverage, health risk, and income • Data collected during 5 rounds of interviews over 2½ years (asset data in Round 5), covering a two year reference period

5. Study Sample and Key Variables Sample: Nonelderly families w/o public insurance (age 21-64) (N=23,951) Dependent variable: Indicator equal to 1 if there is at least one person with private insurance in the family (insurance is point-in-time estimate measured as of the end of year) Family: health insurance eligibility units Key variables: family-level income & family-level net worth

6. Regression Samples Employer coverage market: N=16,172 Someone in family has an ESI offer Individual market: N= 7,779 No one in family has an ESI offer

7. Asset and Debt Data in MEPS Ownership, value and amount owed for 10 types of assets and debt • Home • Second residence • Other real estate • Business/farm • Vehicles • Recreational vehicles • CDs, stocks, bonds, mutual funds • IRAs, Keogh plans, 401K accounts • Checking, savings & money market accounts • Any other savings or assets (jewelry, annuity, trust or estates, collections for investment purposes) • Debt (credit card balances, medical debt, loans from relatives, etc.)

8. Measures of Financial Assets & Net Worth Financial assets= CDs + stocks + bonds+ mutual funds + IRAs + Keogh plans + 401K accounts + checking accounts + savings accounts + money market accounts Net worth= financial assets + home + second residence + other real estate + business/farm + vehicles + other savings or assets - debt

9. Two Empirical Models of Enrollment in Private Insurance • Standard Income Model (OLS): HI=a + by +controls • Wealth Model (OLS): HI=a + b1y + b2 wealth + controls where y= income

10. Control Variables Preferences: • “Health insurance is not worth the money it costs.” • “I’m more likely to take risks than the average person.” • “I’m healthy enough that I really don’t need health insurance.” Health risks: (1) poor physical or mental health, (2) chronic conditions. Age, sex, race, education, occupation, married, family size, region.

11. Employer Coverage Market & Individual Market • 69% of nonelderly families had access to employer-sponsored coverage (67 million) • 31% of nonelderly families were potentially in the individual market (30 million)

12. Differences between the employer coverage market & the individual market • 96.1% of families with ESI offers vs. 10.6% of families without ESI offers have private insurance • 15.2% in the employer coverage market vs. 62.2% in the individual market are poor or low income

13. Median wealth holdings among nonelderly familiesEmployer coverage market

14. Median wealth holdings among nonelderly familiesIndividual market

15. Differences in asset holdings by income and insurance status • Median net worth of privately insured families was 23.2 times that of the uninsured • Among families w/ access to employer coverage, median net worth of privately insured families was 15.4 times that of the uninsured • Among families in the individual market, median net worth of privately insured families was 34.6 times that of the uninsured

16. Percentage of nonelderly families that own assets / have positive net worthEmployer coverage market

17. Percentage of nonelderly families that own assets / have positive net worthEmployer coverage market

18. Differences in asset ownership by income and insurance status(ALL NONELDERLY POPULATION) • Among families with private insurance, 83.0 % owned financial assets vs. 48.0 % among the uninsured • Among families with private insurance, 89.8 % had positive net worth vs. 68.4 % among the uninsured

19. Estimated effects of wealth on private insurance enrollment:Employer coverage market

20. Estimated effects of wealth on private insurance enrollment:Individual market

21. Actual and predicted private insurance enrollment rates:Employer coverage market

22. Actual and predicted private insurance enrollment rates:Individual market

23. The role of wealth in private insurance enrollment: simulation results • The standard income model performs relatively well for the employer coverage market. • In the individual market, the wealth model performs significantly better. • The standard model overestimates enrollment for those with low wealth and underestimates enrollment for those with high wealth. • Standard model estimates are misleading for two subpopulations: low income and high wealth, high income and low wealth.

24. Discussion • The difference in wealth b/w the insured and the uninsured is not fully revealed by income comparisons Median income of the privately insured was 2.9 times the median income of the uninsured Median net wealth of the privately insured was 23.2 times the median net wealth of the uninsured • This discrepancy is even larger among families in the individual market Median income of the privately insured was 2.3 times the median income of the uninsured Median net wealth of the privately insured was 34.6 times the median net wealth of the uninsured