¹Department of Finance, Center for Healthcare & Insurance Studies, School of Business, University of Connecticut, 2100 Hillside Road, Unit 1041, Storrs, CT 06269-1041, U.S.A. E-mail: rsanterre@business.uconn.edu

I thank Laurie Bates and the anonymous referees of this journal for their comments on earlier versions of this paper.

Abstract

This paper uses national time series data for the United States to investigate whether changes in the premium or loading fee offer a better explanation for variations in the percentage of the population with private health insurance from 1960 to 2004. The empirical results suggest that premium provides a better measure of price when estimating the demand for health insurance at the extensive margin. The empirical analysis also indicates that the aggregate short-run price and income elasticities of demand for health insurance are fairly close at -0.19 and 0.27, respectively. One implication is that the percentage of the population with private health insurance in the United States should continue to decline in the future if real premiums persistently grow significantly faster than the overall economy.