Health Insurance and Risk Tolerance

Abstract

Risk preferences play an important function in a consumer’s decision to obtain an insurance policy. On average, risk-intolerant individuals are more likely to be insured when compared to their risk-intolerant counterparts. However, it is unclear whether an individual's health-associated risk levels impact the length of time without health coverage. An analysis of a pooled subset of data from the Medical Expenditure Panel Survey reveals that the odds are highest for the risk-tolerant to be uninsured for 10–12 months (RRR = 1.56, 95% CI = [1.49, 1.63]) than for 0–3 months. Similarly, compared to the risk-intolerant and the risk-uncertain, risk tolerant individuals are the most likely to be uninsured for 7–9 months (RRR = 1.39, 95% CI = [1.27, 1.52]) and for 4–6 months (RRR = 1.32, 95% CI = [1.22, 1.44]). These results offer support for the hypothesis that an individual’s risk tolerance level may impact how long they are willing to bear the inherent vulnerability associated with a lack of health care coverage. Future research should refine these preliminary observations by accounting for sociocultural and political factors that are associated with a consumer's risk tolerance levels as well as further exploring the characteristics of people who are uncertain about their health risk preferences.