Workers on the Margin

Who Drops Health Coverage When Prices Rise?

Published in: Inquiry, v. 47, no. 1, Spring 2010, p. 33-47

Posted on RAND.org on January 01, 2010

by Edward N. Okeke, Richard A. Hirth, Kyle Grazier

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We revisit the question of price elasticity of employer-sponsored insurance (ESI) take-up 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.

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