New analysis looks at how income affects the purchase of individual health coverage

With some federal and state policy makers considering ways to encourage more people to purchase non-group, or individual, health care coverage, a new analysis by Kaiser Family Foundation researchers examines how often people at different income levels buy such coverage when they do not have access to employer coverage or do not obtain public coverage.

The analysis finds that relatively few people at lower incomes purchase non-group coverage – with one in 20 purchasing it among those with incomes at the federal poverty level ($18,660 for a family of four in 2003 dollars). As income increases, the coverage rate increases, though even at four times the poverty level, only about a quarter of individuals purchased coverage. And among those with incomes at least 10 times the poverty level, only about half purchased coverage in the non-group market. The analysis does not assess the reasons why people do not purchase non-group insurance, which could include a perceived lack of affordability or value associated with the coverage, a willingness to remain uninsured for a period of time, or restrictions imposed by insurers based on health status.

A similar pattern emerged among people without other coverage options who are self-employed, who typically are able to deduct their health insurance premiums from their taxable income. The analysis found that coverage rates were higher for the self-employed at all income levels, but even so, most remained uninsured until incomes exceeded four times the poverty level.

These findings suggest some of the challenges policy makers may face in considering ways to encourage more people to purchase non-group coverage. The current modest coverage rates, even at fairly high income levels, suggest that subsidies may need to be substantial in order to encourage a large uptake in purchase.

The analysis uses information on income and health insurance coverage from the Medical Expenditure Panel Surveys’ (MEPS) Household Component for the years 2000 through 2003. It looked at adults aged 19 to 64 who faced a choice between purchasing non-group coverage and going without health insurance. The group excludes anyone who was offered employer-sponsored health coverage or who was covered by public insurance programs such as Medicaid or Medicare.

The full report, “How Non-Group Health Coverage Varies with Income” is available online.