Exiting the Health Insurance Market as a Rational Choice: Demand for

Health Insurance in a Learning Model

Author: Rahul JainDiscussant: Samuel Hsin-yu Tseng

Question

• Why do people drop health insurance coverage?

- Important questions because different causes suggest different policy interventions

- Studies suggest that this dropout is caused by adverse shocks to income and/or premium

- This paper proposes two competing causes: learning and aging effects of age

Motivation

• Show whether the dropout of insurance coverage is economically significant

- transition matrix of insurance status

Age Insurance status in (t-1)

% of uninsured in (t)

50-64 Group coverage 3

35-49 Group coverage

18-34 Group coverage

Motivation (Cont’d)

• Examine how much of the dropout can be attributed to changes in income, changes in premium, and learning and aging effects of age, and other factors

Effects of Job Changes on Coverage

• Data source: MEPS data for 1997-2000

• The implementation of HIPAA in 1996 may delay the dropout of coverage caused by job changes- Acknowledge this institutional feature and may incorporate it in the regression

• HIPAA indicates that - after leaving the job, workers are entitled to COBRA coverage for 18 months- after COBRA coverage is exhausted, workers are guaranteed coverage in the individual market

Policy Implications

• Elaborate the implications of the findings on healthcare policy