The effect of the Prepaid Health Care Act on the demand for health insurance, demand for medical services and labor force utilization in Hawai'i (California, Michigan, Florida, Nevada)

Hawaii established a unique health policy under the Prepaid Health Care Act (PHCA) of 1974 which requires, with some exceptions, private-sector employers to offer full-time workers (i.e., more than 20 hours per week) health insurance benefits. A number of concerns were raised that the law would reduce the price responsiveness of demand for health insurance, increase the demand for health care and alter labor force utilization in Hawaii. These concerns are investigated in this study.; The first essay uses data from CPS to estimate the demand for health insurance by workers in Hawaii with a view to understanding how mandated coverage alters the price responsiveness of demand for employer-sponsored health insurance (ESI). Variations in marginal tax rates are used to identify the price-elasticity of demand for health insurance with respect to after-tax premiums in Hawaii, the United States overall and several states including California, Florida, Michigan, and Nevada. The estimated price elasticity of demand for health insurance of full-time workers in Hawaii is significantly less than the estimate for the United States overall, -0.13 and -0.34 respectively. The implication is that PHCA has caused the demand for coverage to be more price inelastic than otherwise would have occurred.; The second essay examines the effect of health insurance on the demand for physician visits in Hawaii using MEPS and NHIS data from 1996--2002. The results of the study show that the demand for physician visits is slightly higher in Hawaii (i.e., 3.51) than in the United States (i.e., 3.42) because of higher coverage and because Hawaii has larger proportion of people 65 and older than the nationwide. Health insurance is a very significant determinant of the demand for physician visits. People who are insured make more frequent visits to physicians than those who are uninsured because of lower out-of-pocket prices. The number of physician visits responds negatively to changes in the amount paid out-of-pocket. Three alternative models are used to estimate the pure price response: the Poisson model, the Negative Binomial model and the Multinomial logit model. These three models suggest that price elasticities for health care are in the -0.1 to -0.2 range which are slightly lower than the United States.; The third essay examines the impact of PHCA on labor force utilization and labor market sorting in Hawaii using empirical methods. PHCA requires private-sector employers to provide health insurance to full-time workers. However, certain classes of workers are exempt from this regulation. I hypothesize that PHCA will cause employment to shift from the exempt class to the regulated class of workers and that among regulated employees, the utilization of labor will rise. Using four decades of data from CPS 1963--2004, I produce direct estimates (weighted tabulations) and model-based estimates (multinomial logit regression) of the distribution of the labor force by hours employed and across sectors. The results indicate a modest shift in the labor force with more workers in the regulated class and greater utilization of labor among full-time workers than would have otherwise occurred.