Are the Voluntarily Uninsured More Risk Tolerant Than the Rest of Us?

Blood testing in a medical facility in Ethiopia.

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According to the Handbook of Consumer Psychology, risk is defined as a “negatively-valenced likelihood assessment that an unfavorable event will occur.”   For many of us the mere possibility of risk is enough to hedge our bets, while for others the risk threshold is much higher.  Applied to the healthcare debate, it would be interesting to know what risk dynamics separate those who feel they must have health insurance from those who go without and instead pay cash for treatments.  Is this just all about economics, or is more at play?

This debate has become something of a dark horse contender within the larger healthcare debate.  While we’re conditioned to believe that everyone is running scared about not being insured, many people are willing to play the odds.  No one knows exactly what percentage of the 46 million uninsured in the U.S. go voluntarily without coverage, but if you’re young, generally healthy and don’t want (or can’t afford) another big payment every month — it’s likely that you’re more willing to roll the dice. 

For context, here are the age brackets for uninsured Americans as of this year*:

Children under 19: 11 percent

Ages 20-29: 28 percent

Ages 30-35: 23 percent

Ages 36-49: 17 percent

Ages 50-64: 13 percent.

*Source:  CNN – The plight of young, uninsured Americans – March 7, 2009

A full 51% of those without insurance fall between the ages of 20 and 35.  One reason for this is simple: most people in their twenties don’t have jobs that offer insurance.  To be insured they’d have to seek pricey outside coverage.  By age 30, about 75 percent of employers offer insurance (according to the same source as above), so we’d expect to see a radical drop in the uninsured percentage at that point — except, we don’t.  The percentage stays roughly the same until age 36 when family life looms larger for many and the number of dependents increases (not to mention telltale jumps in blood pressure and other health markers). 

So one risk threshold appears at the dividing point between “young and solo” and “middle-aged with brood.” But there’s still a hefty percentage (nearly 8 million people) between 36 and 49 that are uninsured as well.  Accounting for those who flatly can’t afford it (or are unemployed), what about the rest? 

The remainder in that bracket are often self-employed. According to some surveys (like this one), more than half of full-time employed men and women who are uninsured are also self-employed. They may be able to afford outside insurance, but it would be a stretch to make the payments so they adopt a “pay as you go” mentality and take their chances.  The self-employed get hit especially hard by insurance companies, particularly when they have to cover an entire family. For many of these people, taking on the equivalent of another mortgage payment every month doesn’t make much sense.  Would they prefer to be insured? Sure. It’s just not feasible, so they pay cash instead and hope for the best.

We have the makings of an interesting correlation here. Self-employed people are more risk-tolerant compared to the rest of us, evidenced by the fact that they’re “going it alone” without employer backing.  Of any employed group, it would be reasonable to expect that they’d be most willing to go without insurance, since as a matter of personality they are less risk adverse than the general population. It’s hard to prove this conclusively, but the logic pans out.

Overall, it looks like tolerance for risk does play a role in voluntary decisions not to carry insurance.  At least for younger people–a generally more risk tolerant group–and adults who are risk takers by nature, the willingness to be uninsured is greater than for the rest of us.

But without the overshadowing economic reality, I doubt uninsured levels would be nearly so high after age 30 as they are now.  Most people when asked say they feel like they’re forced to accept more risk because they have few, if any, decent alternatives. If they had the choice of showing up at an ER with an insurance card or a credit card, they’d take the former option every time.

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2 thoughts on “Are the Voluntarily Uninsured More Risk Tolerant Than the Rest of Us?

  1. A lot of problems with this analysis.

    It assumes that the uninsured by choice are adopting a “pay as you go’ approach. That works quite nicely if they are dropping by their doc for an annual physical or a pulled muscle.

    There is no ‘pay as you go’ when one of these people gets seriously ill. By your very description of these people, they would be ill equipped to handle the huge costs of chemotherapy treatment or a heart bi-pass. So, who pays for that when it happens to the uninsured?

    We do.

    The accept the risk approach is fine, when you are really accepting the risk. If you’ve purchased a house and decided not to insure it, when the house burns down its the owner’s problem (and the bank’s if they were stupid enough not to require insurance.) It is not the problem of the general public. So, fine, take your chances.

    Health care is completely different. The people you are referring to are not assuming the risk – they are deferring the risk onto the rest of society.

  2. Rick — I think you are 100% correct from a society-eye view perspective. I was trying to focus more on the perspective of the individual (be they more or less risk tolerant), which I fully agree is not necessarily consistent with what’s generally speaking better or worse for the rest of us.

    Thanks in particular for your assuming risk vs deferring risk distinction — great point.

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