Demand for insurance by elderly persons: private purchases and employer provision.

Studies of the demand for health insurance by elderly persons often inadequately address the distinctions between those who receive insurance through a former employer and those who purchase insurance on their own. The failure to distinguish these two modes of supplementing Medicare can lead to an inability to identify the effects of important independent variables. Using data from the Survey of Income and Program Participation this paper examines the demand for employer provided health insurance among retired pensioners using a bivariate probit model with partial observability and compares these results to other models of insurance demand among elderly persons. The results indicate that unobserved factors reducing the probability of being offered employer provided insurance are associated with increased acceptance. A comparison of the employer provided results with results from other models of the demand for privately purchased insurance indicates that different independent variables may determine the probability of having these types of insurance. Previous studies of insurance that have not distinguished between these two types of insurance may not provide reliable estimates of the relationship between independent variables and the probability of insurance coverage.