Estimating the Demand for Individual Health Insurance

We use a novel data set from eHealthInsurance.com to estimate the demand for health insurance in the individual market. We use this data to provide the first estimates of health insurance demand in the 36 states that do not manage state-run health insurance exchanges. We find that median own-price elasticities range between -.59 and -1.55. While uninsurance rates in this market are high---45% on average---we find that diversion towards uninsurance are low. The median diversion ratios range between 10.1% to 18.2%. The low diversion ratios imply that the penalty for uninsurance implemented through the Individual Mandate may not have a large impact on the uninsurance rate. We do a partial equilibrium exercise and find that a repeal of the Individual Mandate would lead to a 1.7 percentage point increase the uninsurance rate in the individual market. This represents solely the immediate demand effect, and does not incorporate any feedback to prices through selection.