Racial and Ethnic Disparities in the Purchase of Nongroup Health Insurance: The Roles of Community and Family‐Level Factors

Many current proposals for increasing health insurance coverage of Americans rely on encouraging individuals and families to purchase their health insurance through the nongroup (also called the individual) market. These proposals often feature incentives such as tax credits to subsidize a portion of the purchase price. One rationale for such proposals is the assumption that modest financial incentives can induce uninsured Americans to purchase their own health insurance. However, evidence suggests that this assumption lacks credibility—a number of researchers have concluded that even substantial incentives will induce only a small additional number of persons to purchase their own health insurance (Thomas 1994; Marquis and Long 1995; Chernew, Frick, and McLaughlin 1997; Gabel, Hunt, and Kim 1997). A second rationale for proposals for increasing health insurance coverage through the nongroup market is their political expediency. They avoid the appearance of “heavy-handed” government interference, such as would occur with mandated coverage. Currently, only about 4.5% of the population under the age of 65 relies on the nongroup market as their only source of health insurance (U.S. General Accounting Office 1996). Those who buy nongroup insurance tend to be older than those with employer-sponsored insurance and the uninsured; a greater proportion live in small cities and rural areas, though the majority still live in metropolitan areas. While two-thirds of families buying nongroup insurance are headed by a full-time worker, a much greater percentage of families making this purchase are headed by part-time, part-year, and self-employed workers than families with employer-sponsored insurance (Chollet 2000). This market appears to be flawed in many ways, with widely divergent prices reported for similar products within a single market (Chollet and Kirk 1998). There is substantial concern about adverse selection driving insurers from the market, particularly in states mandating community rating (Chollet 2000) and nongroup markets have collapsed in several states in the wake of reforms (Hackey 2000). However, one study suggests it may be possible to avoid selection bias in subsidized-premium programs (Swartz and Garnick 2000). Whether the nongroup market serves those who need it most is open to question. Adults aged 50–64 who have nongroup coverage are healthier than those who are uninsured and those with employment-based insurance (Simantov, Schoen, and Bruegman 2001). Premiums are substantially higher than in the group market (Simantov, Schoen, and Bruegman 2001), with commissions estimated to be approximately twice as high as in the small group market (up to 20% of premiums) (Hall 2000) and overall “loading” (proportion of premium not spent on health care) around 40% of premiums (Pauly and Percy 2000). Adequate and affordable coverage may be difficult or impossible to find (Duchon and Schoen 2001) and coverage is generally less complete than with group insurance (Gabel et al. 2002). For those with preexisting conditions, coverage may not be offered. If it is, there are likely to be substantial exclusions and premiums may be unaffordable in states without community rating (Pollitz, Sorian, and Thomas 2001). Where there are high-risk pools, the theoretical possibility of coverage is frequently negated by unaffordable premiums (Stearns and Mroz 1995). Our previous, multivariate analyses of the purchase of nongroup health insurance by respondents to the 1987 National Medical Expenditure Survey (NMES) who would otherwise have been uninsured found that being a racial or ethnic minority group member and having lower educational attainment, lower income, and lower wealth were all independently associated with lower odds of purchasing nongroup insurance. The lower uptake associated with minority group membership was particularly troubling, since it persisted after adjustment for the other factors as well as health status, family configuration, and responses to questions about the value of health insurance and of health care (Saver and Doescher 2000). In this study, we sought to further explore possible underlying determinants of the disparities in uptake of nongroup health insurance related to racial or ethnic background. As our previous work showed that subjects’ stated attitudes about the value of health insurance and health care did not explain the observed racial and ethnic disparities, we were particularly interested in whether community-level measures, such as strength of the local safety net or inequality and social capital measures (Kawachi and Kennedy 1997), could explain the differences in the uptake of nongroup health insurance associated with minority group membership. We had two inequality and social capital measures available from the Census Bureau: race-specific measures of income inequality and housing segregation. We hypothesized that, in communities with higher levels of inequality on these measures, members of disadvantaged minority groups would be less likely to purchase nongroup health insurance, reflecting greater feelings of disenfranchisement and lower likelihood of adopting a mainstream view of the importance of buying health insurance if it was not otherwise available.