Health insurance coverage for people under age 65 in America is predominately provided through employers (Fronstin, 2008). For individuals without ties to the workforce, or with jobs that do not provide insurance, options are limited to public programs, for those who qualify, or finding insurance in the non-group market. The non-group market is rarely chosen as a source for obtaining insurance by those with the opportunity to get health insurance through an employer, leading the non-group market to be described as a residual market (Rogal, 2008).

In the non-group market, before making an enrollment decision an individual must first navigate multiple options based on price and benefits to choose a suitable policy. There are many factors for a purchaser to consider: reputation of the insurance company, cost sharing through deductibles and co-payments, the provider network, and their own expected costs. While some individuals obtain the aid of an insurance agent in evaluating policies, many individuals complete the selection process independently (United States General Accounting Office, 1996). In addition, typically in the large-employer market individuals are not denied insurance or charged more due to health condition while in the non-group market underwriting is common.1

Past health insurance reform plans have proposed motivating more people to buy insurance in the non-group market with mechanisms such as tax credits, as a strategy for expanding coverage and decreasing costs to both individuals and society.2 However, there are well recognized problems with this market in terms of access and affordability; many studies
11 In the small-employer group market insurers cannot exclude coverage for a particular individual or deny coverage to the group. However, in many states policies can be medically underwritten making premiums very expensive for small groups with any members with health problems. In some cases premiums are so unaffordable that in effect it is the same as small groups being denied coverage (Nichols, 2006).
2 During his administration President Bush made several proposals which would have encouraged individuals to purchase insurance in the non-group market. John McCain’s health care reform plan during his Presidential Campaign would have encouraged non-group insurance. (The White House, 2007; McCain-Palin 2008, 2008)

Most have focused on the difficulties individuals in poor health face when purchasing non-group insurance. These studies focus on the barriers to obtaining insurance that individuals in poor health may face because insurers will not sell to them, will only sell a restricted policy, or will charge prohibitively high prices. Far fewer studies have looked at the choice to purchase insurance for reasons other than price, and factors that might affect that decision. Two studies found that minorities and individuals with lower education levels were less likely to purchase non-group insurance after considering health status and income (Saver and Doescher, 2000; Saver et al., 2003).

We take this opportunity to analyze factors that are associated with the decision to purchase non-group insurance by individuals who do not have access to the employer-sponsored insurance system and who are not publicly insured. Conceptually the paper aims to examine if possessing knowledge about how to purchase insurance, and the value of health insurance, along with potential barriers to obtaining that knowledge and to navigating the market, impact purchase decisions. These factors are not directly measurable, and this study will focus on education level, ethnic and racial minority group status, and English language ability as factors that may be correlated with knowledge about insurance and ability to navigate the market. The study hypothesizes that lower education levels, being a racial or ethnic minority, and limited ability to speak English are all independently associated with a lower likelihood of purchasing non-group insurance, holding health, income, risk attitudes, and demographic factors constant. The analysis is conducted with the 2005 Household Component of the Medical Expenditure Panel Survey (MEPS), a national survey.