Health Insurance and Health Care Demand Among the Self-employed

This paper investigates the various insurance options that are available to self-employed workers, including nongroup individual plans that have been the focus of policy reforms during the past decade. Estimates of health care demand models seek to determine whether these options relate to spending on and usage of physician services and prescription drugs as well as total medical expenses. Results based on 1996–2005 Medical Expenditure Panel Survey data indicate that individual enrollees spend less than group enrollees, but models that attempt to purge endogeneity bias suggest that this difference does not depend on insurance per se. Rather, those who enroll in individual plans possess unmeasured traits associated with lower health care demand.