Wealth, Income, and the Affordability of Health Insurance (Text Version)

Slide presentation from the AHRQ 2009 conference.

On September 15, 2009, Didem Bernard, Ph.D. made this presentation at the 2009 Annual Conference. Select to access the PowerPoint® presentation (804 KB) (Plugin Software Help).


Slide 1

Slide 1. Wealth, Income, and the Affordability of Health Insurance

Wealth, Income, and the Affordability of Health Insurance

Didem Bernard, Ph.D.
Jessica Banthin, Ph.D.
and
William Encinosa, Ph.D.

Slide 2

Slide 2. The Affordability Puzzle (Adults 21-64)

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) 

Slide 3

Slide 3. Research Questions

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? 

Slide 4

Slide 4. Data

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 2� years (asset data in Round 5), covering a two year reference period 

Slide 5

Slide 5. Study Sample and Key Variables

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 

Slide 6

Slide 6. Regression Samples

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 

Slide 7

Slide 7. Asset and Debt Data in MEPS

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.) 

Slide 8

Slide 8. Measures of Financial Assets and Net Worth

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 

Slide 9

Slide 9. Two Empirical Models of Enrollment in Private Insurance

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 

Slide 10

Slide 10. Control Variables

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. 

Slide 11

Slide 11. Employer Coverage Market and Individual Market

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)

 

Slide 12

Slide 12. Differences Between the Employer Coverage Market and the Individual Market

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 

Slide 13

Slide 13. Median Wealth Holdings among Nonelderly Families: Employer Coverage Market

Median wealth holdings among nonelderly families
Employer coverage market

 

Financial Assets

Net Worth

Income

Privately Insured

Uninsured

Privately
Insured

Uninsured

All Families

$10,226
(486)

$153
(71)

$76,945
(2,801)

$5,000
(908)

Quartile 1

600
(78)

5
(25)

7,667
(807)

2,778
(426)

Quartile 2

5,000
(435)

299
(174)

42,974
(2,489)

12,491
(5,574)

Quartile 3

20,367
(1,082)

3,936
(2,440)

108,585
(3,938)

30,134
(24,752)

Quartile 4

63,912
(3,439)

6,591
(6,887)

246,980
(7,445)

57,200
(67,657)

 

Slide 14

Slide 14. Median Wealth Holdings among Nonelderly Families: Individual Market

Median wealth holdings among nonelderly families
Individual market

 

Financial Assets

Net Worth

Income

Privately Insured

Uninsured

Privately
Insured

Uninsured

All Families

$10,849
(3,055)
$0
(5)
$105,819
(11,116)
$3,057
(325)
Quartile 1
200
(178)
0
(6)
11,235
(10,174)
-7
(5)
Quartile 2
1,527
(1,769)
0
(5)
21,293
(7,122)
2,009
(303)
Quartile 3
4,912
(4,312)
97
(37)
88,474
(16,617)
5,787
(580)
Quartile 4
23,700
(4,469)
1,808
(3150
175,684
(19,896)
50,963
(5,921)

 

Slide 15

Slide 15. Differences in Asset Holdings by Income and Insurance Status

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 

Slide 16

Slide 16. Percentage of Nonelderly Families that Own Assets / Have Positive Net Worth: Employer Coverage Market

Percentage of nonelderly families that own assets / have positive net worth
Employer coverage market

 

 

Financial Assets

Net Worth

Income

Privately Insured

Uninsured

Privately
Insured

Uninsured

All Families

83.0
(0.6)
55.7
(2.5)
89.7
(0.4)
76.8
(2.1)
Quartile 1
67.0
(1.1)
50.4
(3.1)
76.5
91.1)
72.9
(2.7)
Quartile 2
81.0
91.2)
56.4
(5.1)
88.4
(0.7)
81.1
(3.9)
Quartile 3
89.4
(0.7)
77.3
(8.5)
95.1
(0.4)
85.0
(7.2)
Quartile 4
93.3
(0.6)
81.8
(9.3)
97.7
(0.3)
93.2
(6.6)

 

Slide 17

Slide 17. Percentage of Nonelderly Families that Own Assets / Have Positive Net Worth: Individual Market

Percentage of nonelderly families that own assets / have positive net worth
Individual market

 

Financial Assets

Net Worth

Income

Privately Insured

Uninsured

Privately
Insured

Uninsured

All Families

83.9
91.8)
47.1
(1.1)
91.7
91.3)
67.4
(1.1)
Quartile 1
59.7
(6.7)
27.8
(1.8)
75.9
(5.8)
46.9
91.9)
Quartile 2
80.2
(3.9)
41.3
(1.7)
83.0
(3.9)
67.1
91.5)
Quartile 3
82.3
(3.6)
56.0
(1.9)
90.1
(3.2)
75.0
91.5)
Quartile 4
90.3
(1.8)
70.3
(1.9)
97.6
(0.8)
86.4
(1.3)

 

Slide 18

Slide 18. Differences in Asset Ownership by Income and Insurance Status (ALL NONELDERLY POPULATION)

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 

Slide 19

Slide 19. Estimated Effects of Wealth on Private Insurance Enrollment: Employer Coverage Market

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

 

Standard Income Model

Wealth Model

Income qrtl 2

2.588
(0.005)
2.170
(0.004)

Income qrtl 3

4.906
(0.013)
3.651
(0.010)
Income qrtl 4
8.089
(0.030)
5.586
(0.022)
Wealth qrtl 2
-1.848
(0.003)
Wealth qrtl 3
-2.137
(0.005)
Wealth qrtl 4
-2.133
(0.007)

Adjusted R2

14.83%16.04%

 

Slide 20

Slide 20. Estimated Effects of Wealth on Private Insurance Enrollment: Individual Market

Estimated effects of wealth on private insurance enrollment:
Individual market

 

Standard Income Model

Wealth Model

Income qrtl 2

1.040
(0.003)
0.908
(0.002)

Income qrtl 3

1.560
(0.004)
1.254
(0.003)
Income qrtl 4
2.785
(0.007)
1.688
(0.004)
Wealth qrtl 2
-1.167
(0.004)
Wealth qrtl 3
-2.104
(0.005)
Wealth qrtl 4
-5.586
(0.014)

Adjusted R2

20.88%24.59%

 

Slide 21

Slide 21. Actual and Predicted Private Insurance Enrollment Rates: Employer Coverage Market

Actual and predicted private insurance enrollment rates:
Employer coverage market

Income-wealth quartilesActual Rate

Standard Income Model

Wealth Model

% Point Improvement

Low income, low wealth

89.5

90.6
(0.4)

89.0
(0.4)

0.6
(0.6)

Low income, high wealth

97.4

95.7
(0.4)

97.1
(0.5)

1.4
(0.7)

High income, low wealth

95.6

99.1
(0.5)

98.2
(0.4)

0.9
(0.7)

High income, high wealth

99.6

99.5
(0.5)

99.5
(0.5)

0.0

 

Slide 22

Slide 22. Actual and Predicted Private Insurance Enrollment Rates: Individual Market

Actual and predicted private insurance enrollment rates:
Individual market

Income-wealth quartilesActual Rate

Standard Income Model

Wealth Model

% Point Improvement

Low income, low wealth

3.0

5.2
(0.5)
3.5
(0.5)
1.7
(0.7)

Low income, high wealth

23.2

13.5
(0.4)
26.4
(0.5)
6.5
(0.6)

High income, low wealth

7.8

22.4
(0.4)
8.9
(0.5)
13.5
(0.7)

High income, high wealth

44.7

38.7
(0.4)
45.0
90.4)
5.7
(0.6)

Slide 23

Slide 23. The Role of Wealth in Private Insurance Enrollment: Simulation Results

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. 

Slide 24

Slide 2. Discussion

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
Current as of December 2009
Internet Citation: Wealth, Income, and the Affordability of Health Insurance (Text Version). December 2009. Agency for Healthcare Research and Quality, Rockville, MD. http://www.ahrq.gov/news/events/conference/2009/bernard/index.html