Would Your Rather Pay for Health Insurance or... ?

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I'm a pretty risk-averse person. When I went to Las Vegas, the most I was willing to gamble was a roll of quarters at the slot machines. I've always had car insurance, just in case. I buy AAA coverage too, 'cause you never know. And I've always had health insurance. My friend Joe, on the other hand, is far more comfortable with risk. He's young and healthy, and argues, 'Why pay for something you're never going to use?' He feels comfortable about not having health insurance.

Indeed, there are quite a few Americans who are uninsured. For young people in particular, insurance may seem like an unnecessary expense. But for most people, the cost of health insurance is the major obstacle.

However, it's not just about how much health insurance costs. For most people, it comes down to a choice between health insurance and 'X,' where 'X' is some other monthly expense. As a result, the cost/benefit of health insurance is inevitably compared to the cost/benefit of X, and health insurance often loses because it might feel like money being spent with no immediate or apparent benefit. After all, most people can't afford to pay for everything and have to choose what they will be spending money on every month.

It is this notion of having to choose between health insurance and something else that led me to conduct a survey in January at the Georgetown Institute for Consumer Research. I asked consumers a fairly simple question:

Many people have to make choices when it comes to their monthly expenses. If you had to choose between spending money every month on paying for health insurance versus each of the following monthly expenses, which would you pick?

I then gave a series of common monthly expense categories such as paying down debt, internet/data plans, eating out, gym memberships, etc. The goal was to determine whether health insurance would beat out any of the categories. Would consumers choose health insurance over paying for their internet? Would health insurance be preferred over Cable TV? How would it fare against paying for a gym membership?

Let's first take a look at what consumers said in general. The chart below shows the percentage of consumers who would rather pay for health insurance (shown in red) every month than the corresponding other expense category. For instance, only 19 percent of consumers would rather pay for health insurance than use the money to pay down debt. In contrast, 59 percent of consumers would rather pay for health insurance than spend money on buying organic groceries every month.

What About Gender Differences?

These data clearly indicate that paying for health insurance ranks fairly low on our list of monthly expense priorities. Financial concerns (like paying down debt), and connecting with others (by paying for Internet access or cell phone plans) are far more important than health insurance. Of course, given the day and age we live in, this makes sense.

However, I was surprised by the relatively low numbers for the other expense categories as well. For instance, about half of the respondents said they would rather spend money eating out or paying for cable than paying for health insurance. Moreover, even though paying for health insurance beat out paying for a gym membership or buying organic groceries, it did so by a fairly small margin.

I was curious about whether this data pattern may be different for men compared to women. After all, the Affordable Care Act has been described as being beneficial to women. Moreover, the law provides women access to various forms of preventive care, including contraception, without a copay. Consequently, it seems plausible that women may be more willing to pay for health insurance than men. The two charts below show the percentage of women and men who said they would rather pay for health care versus the competing expense category.

If You Picked Health Insurance, What Are You Going to Cut?

So did women and men differ in terms of whether they would rather pay for health care? The data show that women were somewhat more likely to pick health insurance than men in almost every category (the exception being that both men and women were similarly likely to choose health insurance over organic groceries). Moreover, women picked health insurance over the competing category the majority of the time (four out of the seven categories). In comparison, the only categories that men did not prefer over health insurance were gym memberships and organic groceries.

Despite these differences, it seems that both women and men would prefer to spend money on things other than health insurance. As in the overall chart above, the percentage of women and men who would choose health insurance over one of the expense categories is never really high. This suggests that when it comes to making a choice between spending on health insurance versus spending on something else, the something else often wins.

For many Americans who purchased health insurance in the last few months, the premiums will be a significant monthly expense. Moreover, this expense will likely have to be balanced by reducing other expenses. In fact, the typical consumer's strategy will probably involve cutting out some expense category altogether.

So the big question is, what are consumers going to cut down on in the coming months? Our data suggest that spending on Internet and cell phone plans is not going to suffer. Rather, consumers may be more likely to reduce their spending on cable TV, eating out, gym memberships, and organic groceries.

If you've recently purchased health insurance, are you planning to cut down expenses in some other area? If so, what's going to be cut from your budget?

Have a question about consumer behavior that you'd like answered? Click here to submit your question. The Georgetown Institute for Consumer Research receives funding from KPMG. However, research activities are determined by the interests of the Institute's researchers and trending topics.