Dental care demand: insurance effects and plan design

This study concentrates on an important health policy question: the impact of dental insurance on the demand of adults for dental services. Demand equations for individuals are estimated from a systematic random sample of 4,173 families with complete information on their dental claims (insured through Pennsylvania Blue Shield) and survey data. The principal contributions of the research are twofold: (1) to provide rigorous, large-sample estimates of the demand for dental services of insured individuals--providing a complementary set of "natural" experiment results to the randomized experiment results of the RAND Health Insurance Experiment--and (2) to estimate the incremental effects on dental care demand of certain factors related to adverse selection. The study is a companion to a previously published study of children by the same authors. Generally, the analysis shows relatively small money price elasticities of dental care demand among this insured adult population (ranging from -.01 to -.266 across specific types of service). Given a finding that total expenditures for Basic services are 37 percent and 90 percent higher, respectively, for community-rated (versus experience-rated) primary subscribers and insureds, we conclude that differential adverse selection between community- and experience-rated groups accounts for significant differences in dental demand.