CHOICE OF HEALTH-INSURANCE BY FAMILIES OF THE MENTALLY-ILL

This paper investigates whether choice of health insurance is influenc ed by the perceived mental and physical health of family members among a sample of policy-holders with private health insurance. A multinomi al probit model of the choice among major medical coverage only, tradi tional full coverage, and coverage through a health maintenance organi zation is estimated. Results indicate that the presence of at least on e family member who rates his or her general health as poor does not a ffect the policy-holder's choice of health insurance. However, the pre sence of at least one family member considered at risk of mental illne ss does in some instances affect the policy-holder's choice of health insurance: We observe significant effects for policy-holders who are f emale, black, have some college education, work for a large firm, and live in an urban area. These findings suggest that adverse selection m ay arise when individuals are able to choose between health insurance policies with different degrees of coverage for mental health care and that such effects are far more pronounced for those people who consid er themselves at risk for mental illness than physical illness.