Health Insurance Take-up by the Near-Elderly

This study examines the effect of price on the decision by older workers and early retirees to take up health insurance for which they are eligible. The analysis is based on administrative data from a medium sized employer and takes advantage of a natural experiment created by the firm’s health insurance contribution policy. For retirees, the amount the firm contributes toward coverage depends on when a person retired and her years of service at that date. As a result of this policy, there is considerable variation in out-of-pocket premiums faced by individuals in the data, but this variation is independent of the non-price attributes of the health insurance plans offered, and plausibly exogenous to worker characteristics that are likely to affect the demand for insurance. We find that price has a statistically significant, but small effect on the decision to take up coverage. The implied elasticities are very similar to results found in previous studies using very different data. JEL Nos. I11, D12Preliminary and Incomplete – Do Not Cite 1