THE DEMAND FOR HEALTH-INSURANCE BY EMPLOYEES IN A VOLUNTARY SMALL-GROUP INSURANCE PROGRAM

OBJECTIVES. This study examined the decisions of small group employees to enroll in prepaid plans offered through Healthcare Group of Arizon a (HCGA), a state-sponsored and state-administered voluntary insurance program. METHODS. The study population included 653 potential employe e enrollees who were offered the option of two health plans between Ja nuary 1993 and June 1993, with 447 enrolling in one of the two plans. Data sources included two telephone surveys, HCGA administrative files , and enrollment application forms. RESULTS. The estimates of adjusted price elasticity were in the range of -0.12 to -0.24 for employees wi th prior insurance and were in the range of -0.42 to -0.51 for employe es without prior insurance. The likelihood of enrolling in HCGA increa sed with log(income) and decreased with log(income) squared. The avera ge income elasticity across income groups was 0.12. CONCLUSIONS, The r esults indicate that small group employees without prior insurance wer e more sensitive to the price of health insurance than those with prio r insurance. Healthcare Group of Arizona health plans may have been vi ewed as inferior goods by high income employees possible because of th eir association with the Medicaid program.