MORE: For analysis of poverty and income trends, see Already more than a lost decade: Poverty and income trends continue to paint a bleak picture. 

While the Great Recession officially ended in the summer of 2009, the labor market continued to deteriorate into 2010 and stagnated in 2011. As most Americans, particularly those under age 65, rely on health insurance through the workplace, these labor market trends make it no surprise that employer-sponsored health insurance coverage rates fell in 2011. But the situation started deteriorating long before the Great Recession: Employment-based coverage has not increased in 11 years, falling a total of 10.8 percentage points since 2000, to 58.3 percent in 2011.

Because Americans age 65 and older have near-universal access to health insurance coverage through Medicare, this report focuses exclusively on coverage rates for the under-65 population. This report’s highlights are:

• In 2011, 47.9 million people under age 65 were uninsured, down from 49.2 million in 2010. However, the number of uninsured non-elderly Americans is 11.7 million higher than in 2000.
• The share of non-elderly Americans with employer-sponsored health insurance has fallen for 11 years in a row, declining 10.8 percentage points since 2000 to 58.3 percent in 2011.
• The only reason why the decline in the employer-sponsored insurance rate from 2010 to 2011 did not translate into an increased share of non-elderly Americans with no insurance is that over 2 million more people under age 65 were covered by Medicaid or the Children’s Health Insurance Program (CHIP) in 2011 than in 2010.
• Critical provisions in the Patient Protection and Affordable Care Act (also known as health reform) helped offset the declines by insuring young adults on their parents’ health insurance policies. The uninsured rate for young adults, those 19–25 years old, declined 2.2 percentage points from 2010 to 2011, far more than for any other age group.

Overall coverage trends, 2010–2011

Employer-sponsored health insurance (ESI) remains the predominant form of coverage for those under age 65. In 2011, however, the rate of coverage fell over the year (as shown in Figure A). Non-group coverage (individually purchased private insurance) was flat from 2010 to 2011, while public coverage rose significantly, from 21.9 percent to 22.7 percent. Despite the decline in ESI coverage, this increase in the share of Americans covered by public insurance has kept the total share without insurance from rising in 2011. In fact, the share of uninsured Americans under age 65 declined from 18.4 percent in 2010 to 17.9 percent in 2011.

Figure A

A closer look at employer-sponsored insurance coverage declines

The Census report suggests evidence of further unraveling of the employer-based coverage system, as the share of persons covered through work (either their own employer or that of a family member) declined for the 11th year in a row.

As shown in Figure B, ESI covered 58.3 percent of people under age 65 in 2011, down from 58.6 percent in 2010. The share declined by 10.8 percentage points from 2000 to 2011.

Figure B

Figure C illustrates the incidence of employer-sponsored health insurance across various age groups in 2009, 2010, and 2011. Adults age 55–64 consistently have the highest workplace coverage rates, while young adults (age 19–25) have the lowest.

Figure C

For young adults, health reform played a key role in preventing a decline in workplace coverage. The Patient Protection and Affordable Care Act includes provisions that allow young adults up to age 26 to secure health insurance coverage through their parents’ employer-sponsored health insurance policies. Between 2009 and 2010, the only age group that experienced statistically significant increases in overall coverage was 19–25 year olds, and between 2010 and 2011, they experienced the largest increase. Their uninsured rate fell a significant 1.6 percentage points in 2010 and then another 2.2 percentage points in 2011. Looking closely at changes in employer-sponsored insurance since the young adult provision took effect in mid-2010, it is clear that young adults are going against the trend. Since the job market was not disproportionately favorable toward young adults, it is clear these positive trends are due to the Affordable Care Act.

ESI coverage for the young group (those under age 19) continued its unabated decline, falling 0.9 percentage points between 2009 and 2011, from 55.7 percent to 54.8 percent. The coverage of children (strictly under 18) through the employment-based system has fallen 12.0 percentage points since 2000. The total share of uninsured children fell over the last year, however, as their Medicaid/CHIP coverage rates continued to rise, increasing from 34.8 percent in 2010 to 35.5 percent in 2011.

Over the decade, it is clear how public insurance has shielded children from the declines in employer-sponsored insurance. Figure D shows the aforementioned 12 percentage-point decline in the share of children with employer-sponsored health insurance from 2000 to 2011. Meanwhile, the share of children covered by public insurance rose 14.6 percentage points (primarily due to Medicaid/CHIP), ultimately leaving fewer children uninsured.

Figure D

Non-elderly adults have not been so fortunate. Those between ages 18 and 64 experienced a 4.8 percentage-point increase in the share uninsured from 2000 to 2011. Unlike children, their ESI losses were not fully offset by increasing public coverage.

Conclusion

The data released today by the U.S. Census Bureau highlight that the current system does not provide stable and secure coverage for many Americans. The share of Americans under age 65 with employment-based health coverage fell for the last 11 years, dropping from 69.2 percent in 2000 to 58.3 percent in 2011. The share of uninsured Americans under age 65 rose from 14.7 percent in 2000 to 17.9 percent in 2011. However, this 17.9 percent share in 2011 is a decline from 18.4 percent in 2010; looking at the numbers released by the U.S. Census Bureau, it is clear that government insurance and health reform together account for this decline. The phase-in of the Patient Protection and Affordable Care Act over the next few years should eventually stem any additional losses and reverse the current trend, covering millions more Americans.

—Research assistance by Nicholas Finio

AUDIO: Listen to EPI’s press call about the 2010 report

While the Great Recession officially ended in the summer of 2009, the labor market continued to deteriorate into 2010.  The unemployment rate increased from 9.3 percent in 2009 to 9.6 percent in 2010, and long-term unemployment (the unemployed without a job for 27 weeks or more) grew from 31.2 percent in 2009 to 43.3 percent in 2010.  As most Americans, particularly those under age 65, rely on health insurance through the workplace, these unemployment trends make it no surprise that employer-sponsored health insurance continued to fall from 2009 to 2010.  But the situation started deteriorating long before the Great Recession: Employment-based coverage for those under 65 eroded in nine of the past 10 years, including a 0.7 percentage point drop from 59.4 percent in 2009 to 58.6 percent in 2010.

Because all Americans age 65 and older have near-universal access to health insurance coverage through Medicare, this report focuses exclusively on coverage rates for the under-65 population.  This report’s highlights are:

• In 2010, 49.1 million people under 65 were uninsured, up about three-quarters of a million people since 2009. The number of uninsured non-elderly Americans is 12.9 million higher than it was in 2000.
• The share of non-elderly Americans with employer-sponsored health insurance declined for nearly 10 years in a row, down from 59.4 percent in 2009 to 58.6 percent in 2010, a total decline of 10.5 percentage points since 2000.
• The only reason why the drop in employer-sponsored insurance (ESI) did not translate into a large increase in the total share uninsured is because 1.3 million more people under 65 were covered by Medicaid/SCHIP in 2010.
• Critical provisions in the Patient Protection and Affordable Care Act (also known as health reform) and the Recovery Act of 2009 helped offset the declines by insuring young adults on parent’s health insurance policies and by helping to shore up Medicaid funding.

Overall coverage trends, 2009-10

Employer-sponsored health insurance remains the predominant form of coverage for those under 65 years old. In 2010, however, the rate of coverage fell over the year (as shown in Figure A). Non-group coverage (individually purchased private insurance) increased slightly from 2009 to 2010, while public coverage rose significantly from 21.5 percent to 21.9 percent. Despite the decline in ESI coverage, this increase in the percent of Americans covered by public insurance has kept the total share without insurance from rising even faster in 2010.

A closer look at employer-sponsored insurance coverage declines

The Census report suggests evidence of further unraveling of the employer-based coverage system, as the share of persons covered through work (either their own or a family member’s employer) declined for nearly the tenth year in a row. According to the revised health insurance data, in only one year (2005) did employer-sponsored insurance rise (and then only 0.1 percentage points).

As shown in Figure B, ESI covered 58.6 percent of people under age 65 in 2010, down from 59.4 percent in 2009, and a total decline of 10.5 percentage points since 2000.

Figure C illustrates the incidence of employer-sponsored health insurance across various age groups from 2000 to 2010.  Prime working-age adults (25-54) consistently have the highest workplace coverage rates, while young adults (18-24) have the lowest.  Losses were in excess of 10 percentage points over the decade for all groups except the near elderly and young adults.  Those aged 55 to 64 have continued to have high and rising labor force participation rates, leading to lower declines in employer-sponsored insurance for this group. For young adults, health reform played a key role in stemming the fall of workplace coverage, though the decline was still substantial.

The Patient Protection and Affordable Care Act included provisions that allowed young adults up to age 26 to secure health insurance coverage through their parents’ employer-sponsored health insurance policies. Between 2009 and 2010, the only age group that experienced statistically significant increases in overall coverage was 18-24 year olds.  Their uninsured rate fell a significant 2.0 percentage points.  While the number of uninsured people under 65 rose by over three-quarters of a million, the number of uninsured between 18 and 24 years old actually fell half a million.

ESI coverage for children continued its unabated decline, falling again between 2009 and 2010, from 55.8 percent to 54.8 percent. The coverage of children through the employment-based system has fallen 11.9 percentage points since 2000. The total share of uninsured children did not statistically change over the last year, however, as their Medicaid/SCHIP rates continued to rise, increasing from 33.8 percent in 2009 to 34.8 percent in 2010.

Over the decade, it is clear how public insurance has shielded children from the declines in employer-sponsored insurance.  As shown in Figure D, the percent of children with employer-sponsored health insurance dropped 11.9 percentage points from 2000 to 2010, while the percent with public insurance rose 13.7 percent (primarily due to Medicaid/SCHIP), ultimately leaving fewer children uninsured. In part, the security of the safety net was protected from significant cuts by the federal government’s Recovery Act aid to states.

The Recovery Act of 2009 included significant state aid that lessened the need for states to make cuts to services and spending, or increases in state and local taxes.  A large percentage of the state aid was in the form of increased Medicaid funding to reduce the extent and severity of cuts to that program. While it is impossible to know what would have occurred had states not received Recovery Act funds, it is clear that those funds did help maintain and increase Medicaid coverage.

Non-elderly adults have not been so fortunate. The 18-to-64-year-old population experienced a statistically significant increase of 13.3 million more uninsured adults from 2000 to 2010.

Conclusion

The data released September 13, 2011 by the U.S. Census Bureau highlight the fact that the current system does not provide stable and secure coverage for many Americans. The share of Americans under age 65 with employment-based health coverage fell for nine out of the last 10 years, dropping from 69.2 percent in 2000 to 58.6 percent in 2010. The percent of uninsured Americans under age 65 rose from 14.7 percent in 2000 to 18.4 percent in 2010. The declining share of Americans with employer-sponsored health insurance and the associated rise in the total uninsured over the 2000s are trends that will worsen in the near future.  Fortunately, the phase-in of the Patient Protection and Affordable Care Act over the next few years should eventually stem any additional losses and reverse the current trend, covering millions more Americans.

Research assistance by Nicholas Finio

While this country was already in a recession in 2008, the economy sharply deteriorated in 2009.  The unemployment rate increased from 5.8% to 9.3% between 2008 and 2009, the largest one-year increase on record.  As most Americans, particularly those under 65 years old, rely on health insurance through the workplace, it is no surprise that employer-sponsored health insurance fell precipitously from 2008 to 2009.  Employment-based coverage for the under 65 continued to erode for the ninth year in a row, falling 3.0 percentage points from 61.9% in 2008 to 58.9% in 2009.

Because all Americans at least 65 years of age have near-universal access to health insurance coverage through Medicare, this report focuses exclusively on coverage rates for the under-65 population.  This report’s highlights are:

• In 2009, 50.0 million people under 65 were uninsured, up 4.3 million since 2008. The number of uninsured non-elderly Americans is 11.8 million higher than is was in 2000.
• The share of non-elderly Americans with employer-sponsored health insurance declined for the ninth year in a row, down from 61.9% in 2008 to 58.9% in 2009, a total decline of 9.4 percentage points since 2000.
• The only reason why the drop in employer-sponsored insurance (ESI) did not translate into an even larger increase in the total share uninsured is because 4.9 million more people under 65 were covered by Medicaid/SCHIP in 2009.
• Unfortunately, the number without ESI, and thus without any insurance, is likely to swell in 2010 and 2011 as the unemployment rate is expected to continue to rise.
• Critical provisions in the Recovery Act mitigated the damage by subsidizing COBRA and helping to shore up Medicaid funding.

Overall coverage trends, 2008-09

Employer-sponsored health insurance remains the predominant form of coverage for those under 65 years old. In 2009, however, the rate of coverage fell over the year (as shown in Figure 1). Non-group coverage remained flat over the period while public coverage rose significantly from 19.7% in 2008 to 21.4% in 2009. It is this increase in the percent of Americans covered by public insurance that has kept the share of Americans without insurance from rising faster in 2009 as ESI fell.

A closer look at ESI losses

The Census report suggests evidence of further unraveling of the employer-based system as the share of persons covered through work (either their own or a family member’s employer) declined for the ninth year in a row. As shown in Figure 2, employer-sponsored health insurance covered 58.9% of people under age 65 in 2009, down from 61.9% in 2008, and a total decline of 9.4 percentage points since 2000.

ESI coverage for children continued its unabated decline, falling again between 2008 and 2009, from 58.9% to 55.8%. Children coverage through the employment-based system has fallen 10.1 percentage points since 2000. The share of uninsured children did not statistically change over the last year, however, as their Medcaid/SCHIP rates continued to rise, jumping from 30.3% in 2008 to 33.8% in 2009.

While children have been shielded from the declines in ESI through public insurance increases, non-elderly adults have not been so fortunate. The 18-64-year-old population experienced a statistically significant increase in the share uninsured from 20.3% to 22.3%, an increase of 4.1 million uninsured adults. Workers experienced a significant decline in coverage as well, an increase of nearly 1.5 million more uninsured workers.

Looking to the future

One of the clearest indicators of the deepening recession is the unemployment rate. In 2007, the most recent peak year, the unemployment rate was 4.6%. As shown in Figure 3, average unemployment rose modestly to 5.8% in 2008 then jumped 3.5 percentage points to 9.3% in 2009.  While the largest increase in the unemployment rate for this recession has already been felt, the unemployment rate is forecasted to increase to 9.7% in 2010 and 9.9% in 2011.

While employer-sponsored health insurance remains the predominant form of health coverage for the under-65 population, it is often the case that when people lose their jobs, they lose access to their health insurance. Therefore, it can be expected that the ESI coverage could drop another 0.5 percentage points by 2011 to nearly 58.4%.[1]

While not one-for-one, a drop in ESI coverage is strongly associated with a rise in the number of uninsured Americans, only lessened by increases in public coverage (particularly among children). By 2011, it is likely that the number of nonelderly uninsured will increase by another half million.[2]

Recovery Act of 2009

One factor that may have stifled the erosion of health insurance coverage even with such a high unemployment rate is COBRA.  COBRA coverage, which allows unemployed workers to keep their employer-sponsored health insurance from 18-36 months as long as they pay their premiums, was expanded as part of the American Recovery and Reinvestment Act (ARRA).  Previously, people who participated in COBRA had to pay up to 102% of the costs of the premiums.  Under ARRA, workers received a subsidy for 65% of the premiums if they lost their jobs between September 2008 and December 2009.

Although data on COBRA eligibility and uptake is difficult to measure, early reports suggest that uptake increased significantly with the help of the subsidy.  The Commonwealth Fund, using data from Hewitt Associates, estimate the COBRA take up doubled under ARRA from 19% before the subsidy to 38% after.[3]  That finding is on par with a report from the U.S. Treasury department that looked at people receiving unemployment benefits in New Jersey.  They found the take up rate to be anywhere from 29-32% among eligible UI recipients.[4] 

ARRA also included about $140 billion in aid to states to lessen the need for states to make cuts to services, cuts in spending, or increases in state and local taxes.  A large percentage of the funds that went to states was in the form of increased Medicaid funding to reduce the extent and severity of cuts to that program.  While it is impossible to know what would have occurred had states not received recovery act funds, it is clear that those funds did help maintain and increase Medicaid coverage.

In short, there is emerging evidence that ARRA was successful in stemming the tide of the uninsured from the current recession.

Conclusion

The data released September 16, 2010 by the U.S. Census Bureau highlight the fact that the current system does not provide stable and secure coverage for many Americans. The share of under-65 Americans with employment-based health coverage fell for the ninth year in a row from 61.9% in 2008 to 58.9% in 2009, while the number of uninsured Americans under-65 rose from 17.3% in 2008 to 18.8% in 2009. The continued drop in the share of Americans with employer-sponsored health insurance and the associated rise in the uninsured over the 2000s is only expecte
d to worsen in the near future.  Phase-in of the Patient Protection and Affordable Care Act (health reform) over the next few years is expected to stem any additional losses and reverse the current trend, covering millions more Americans.

[1] Using methodology from Holahan, John, and A. Bowen Garrett. 2009. Rising Unemployment, Medicaid and the Uninsured. Washington, D.C.: Kaiser Family Foundation.

[2] Using methodology from Gruber, Jonathan and Larry Levitt. 2002. Rising Unemployment and the Uninsured. Washington, D.C.: Kaiser Family Foundation.

[3] Bovbjerg, Randall R., Dorn, Stan, Macri, Juliana, and Jack A. Meyer. 2009. “Cobra Subsidies for Laid-Off Workers: An initial Report Card.” The Commonwealth Fund: pub. 1358 vol. 75, Washington, D.C.

[4] U.S. Treasury Department. 2010. “Cobra Insurance Coverage Since the Recovery Act: Results from New Survey Data.” Office of Economic Policy. http://www.ustreas.gov/offices/economic-policy/cobra%20final%20report.pdf.

Employer-sponsored health insurance erosion continues through 2008 and will likely accelerate through 2009

by Elise Gould

Note: For analysis of income and poverty data, see today’s Income Picture

Listen to a press call on this topic featuring Lawrence Katz, Lawrence Mishel, Heidi Shierholz, and Elise Gould [listen/stream] [download MP3] (35 min.)

The number of Americans without health insurance coverage rose from 45.7 million in 2007 to 46.3 million in 2008, according to a report released today by the U.S. Census Bureau. The share of Americans with employment-based coverage continued to erode for the eighth year in a row from 59.3% of Americans covered in 2007 to 58.5% in 2008.

These modest increases in the uninsured are only the tip of the iceberg. The recession that began in December 2007 and took hold in 2008 worsened in 2009. Given that the economy has deteriorated significantly since 2008, the current state of health insurance is worse than today’s report shows.

This report’s highlights:

• In 2008, 46.3 million people were uninsured, up 683,000 since 2007. The number of uninsured Americans is nearly 8 million higher than is was in 2000.

• The share of Americans with employer-sponsored health insurance declined for the eighth year in a row, down from 59.3% in 2008 to 58.5% in 2007, a total decline of 5.7 percentage points since 2000.

• The only reason why the drop in employer-sponsored insurance (ESI) did not translate into an increase in the share uninsured is because 3 million more people were covered by Medicaid/SCHIP in 2008.

• The decline in ESI coverage through the 2000s was felt across the country, with a statistically significant decline in 42 states. No state had a statistically significant increase in coverage over this period.

• Unfortunately, the number without ESI and thus without any insurance is likely to swell in 2009 as the unemployment rate jumped between 2008 and 2009.

• The growing lack of health security further reinforces the need for immediate and large-scale reform of the U.S. health care system.

Overall coverage trends, 2007-08

Employer-sponsored health insurance remains the predominant form of coverage in 2008, however, the rate of coverage fell over the year (as shown in Figure 1). Non-group coverage remained flat over the period while public coverage rose significantly from 27.8% in 2007 to 29.0% in 2008. It is this increase in the percent of Americans covered by public insurance that has kept the share of Americans without insurance from rising in 2008 as ESI fell.

A closer look at ESI losses

The Census report suggests evidence of further unraveling of the employer-based system as the share of persons covered through work (either their own or a family member’s employer) declined for the eighth year in a row. As shown in Figure 2, employer-sponsored health insurance was 58.5% in 2008, down from 59.3% in 2007, and a total decline of 5.7 percentage points since 2000.

ESI coverage for children continued its unabated decline, falling again between 2007 and 2008, from 59.5% to 58.9%. Children coverage through the employment-based system has fallen 7 percentage points since 2000. Children’s uninsured rate did not decline over the last year, however, as their Medcaid/SCHIP rates continued to rise, jumping from 28.1% in 2007 to 30.3% in 2008.

While children have been shielded from the declines in ESI through public insurance increases, non-elderly adults have not been so fortunate. The 18-64-year-old population experienced a statistically significant increase in the share uninsured from 19.6% to 20.3%, an increase of 1.5 million uninsured adults. Workers experienced significant decline in coverage as well, an increase of nearly 1 million more uninsured workers.

ESI across states

The non-elderly population across the country relies on ESI as their primary form of coverage, however, the incidence of coverage varies widely from state to state. Table 1 compares ESI coverage rates for the under-65 population across states between 2000-01 and 2007-08. New Hampshire has the highest rate of ESI coverage for their under-65 population at 75.4% in 2007/08. This rate is followed closely by Massachusetts, Iowa, and Hawaii. It is not surprising that Hawaii and Massachusetts are among the highest coverage rates as each state has an employer mandate. Less than half of New Mexico’s non-elderly population has ESI at 48.9%. Mississippi and Texas also have relatively low rates of coverage.

Since 2000-01, 42 states have experienced statistically significant losses in ESI coverage. Five states—Michigan, Tennessee, Missouri, South Carolina, and North Carolina— experienced losses of at least 8 percentage points over the 2000s. Unfortunately, these losses are only the beginning of what we expect to be even larger losses this year.

High unemployment rate lowers insurance coverage

One of the clearest indicators of the deepening recession is the unemployment rate. In 2007, the most recent peak year, the unemployment rate was 4.6%. As shown in Figure 3, average unemployment rose modestly to 5.8% in 2008. The unemployment rate this year so far has averaged 8.9% and unemployment hit a high in the most recent report for August 2009 at 9.7%. This dramatic increase in unemployment over this recession is one of the worst on record (Shierholz 2009).

While employer-sponsored health insurance remains the predominant form of health coverage for the under-65 population, it is often the case that when people lose their jobs, they lose access to their health insurance. Therefore, the modest declines in ESI from 2007 to 2008 are likely to be exacerbated in the future by the sharp rise in unemployment from 2008 to 2009. Research has shown that a 1 percentage point increase in the unemployment rate is associated with a 0.9 to 1.0 decline in the share of the under-65 population with ESI (Holahan and Garrett 2009; Cawley and Simon 2003).

The under-65 rate of employment-based coverage was 61.9% in 2008, down 1.0 percentage points from 2007. It can be expected that the ESI coverage will drop another 2.9 percentage points to about 59% in 2009.

While not one-for-one, a drop in ESI coverage is strongly associated with a rise in the number of uninsured Americans, only lessened by increases in public coverage (particularly among children). Using an association found between unemployment and the uninsured detailed in Gruber and Levitt (2002), it is likely that the current number of nonelderly uninsured is around 50 million.

Health reform

As the percent of uninsured is expected to rise in conjunction with a slumping economy, it is all the more imperative that meaningful health reform be passed. The current recession highlights the lack of secur
ity people experience as they lose their job, their financial security, and their access to health insurance.

As President Obama reiterated in his speech before a joint session of Congress on Wednesday night, this country needs bold, comprehensive national reform. As employer-sponsored insurance has failed many Americans throughout the 2000s, even during an economic expansion, it is important to ask whether we should rely on this system as the primary and back-up source of coverage for our under-65 population. A safety net in the form of a national exchange with a public insurance option is vital to make sure those that lose their jobs do not also lose their access to coverage.

Conclusion

The data released September 10, 2009 by the U.S. Census Bureau highlight the fact that the current system does not provide stable and secure coverage for many Americans. The share of Americans with employment-based health coverage fell for the eighth year in a row from 59.3% in 2007 to 58.5% in 2008 while the number of uninsured Americans rose from 45.7 million in 2007 to 46.3 million in 2008. The continued drop in the share of Americans with employer-sponsored health insurance and the associated rise in the uninsured over the 2000s is only expected to worsen in 2009 from the deepened recession. Americans need affordable, secure alternatives to a system wherein you lose your coverage when you lose your job. The status quo is simply not a viable solution.

References

Cawley, John, and Kosali I. Simon. 2005. Health insurance coverage and the macroeconomy. Journal of Health Economics, Vol. 24 (2), pp. 299-315.

Gruber, Jonathan and Larry Levitt. 2002. Rising Unemployment and the Uninsured. Washington, D.C.: Kaiser Family Foundation.

Holahan, John, and A. Bowen Garrett. 2009. Rising Unemployment, Medicaid and the Uninsured. Washington, D.C.: Kaiser Family Foundation.

Shierholz, Heidi. 2009. Jobs Picture. Washington, D.C.: Economic Policy Institute. http://www.epi.org/publications/20090904_jobs_picture/

The U.S. Census Bureau released numbers this morning that show that the share of Americans without health insurance coverage fell for the first time since 2000, from 15.8% in 2006 to 15.3% last year. There were 45.7 million uninsured Americans in 2007, down 1.2 million since its 47.0 million level in 2006.

Overall insurance rates ended their uninterrupted decline since 2000. However, this positive news masks a significant shift from private to public coverage. Employment- based coverage continued to decline and much of the fall in the percent of the uninsured is due to increases in public health insurance coverage, especially among children.

The highlights of the report indicate:

• In 2007, 45.7 million people were uninsured, down since 2006. The number of uninsured Americans is still 7.2 million higher than is was in 2000.
• The share of Americans with employment-based coverage continues to decline for the seventh year in a row, down nearly 5 percentage points since 2000.

The Census report suggests evidence of further unraveling of the employer-based system as the share of persons covered through work (either their own or a family member’s employer) declined for the seventh year in a row. As shown in the figure below, employment-based coverage was 59.3% in 2007, down from 59.7% in 2006, and a total decline of 4.9 percentage points since 2000.

While increasing overall coverage is a bright sign for American families, coverage through private insurance continues to decline. Even as employment-based coverage has declined, the share of Americans who receive coverage through the private individual market has also declined.

While the data released today only include information up through 2007, the recent economic downturn suggests that health insurance coverage has only worsened in 2008. As the percent of uninsured is expected to rise in conjunction with a slumping economy and the cost of health care continues to grow faster than inflation, the health care problem has reached a critical level for Americans families. Bold new solutions need to be considered to address the growing health care crisis.

See also today’s Income Picture, Median income rose as did poverty in 2007.

The erosion of employment-based insurance

More working families left uninsured

by Elise Gould

The decline in health insurance coverage continued unabated in 2006, driven primarily by the continued erosion in employer-provided health insurance. In 2006, 47 million Americans were uninsured, up nearly 8.6 million since 2000. The rate of those without insurance has grown 2.1 percentage points during this period, from 13.7% in 2000 to 15.8% in 2006.

Employment-based coverage is still the most prominent form of health insurance in the United States at 59.7% of all Americans; however, the rate of this coverage has fallen in every year since 2000. In 2000, 64.2% of Americans had employer-provided health insurance. By 2006, this percent had fallen 4.5 percentage points. Nearly 2.3 million fewer Americans had employment-based insurance in 2006 than in 2000. This decline does not take into account population growth. As many as 13 million more people would have had employer-provided health insurance in 2006 if the coverage rate had remained at the 2000 level.

Because of these large declines in employer-provided health insurance, workers and their families have been falling into the ranks of the uninsured at alarming rates. There were almost 5 million more uninsured workers in 2006 than in 2000. While uninsured workers are disproportionately young, non-white, less educated, and low wage, workers across the socio-economic spectrum have experienced losses in coverage. Even the most highly educated and highest wage workers had lower rates of insurance coverage in 2006 than in 2000.

As with workers, the downward trend in employer-provided coverage for children (through their parents’ employers) continued into 2006: 3.4 million fewer children had employment-based coverage in 2006 than in 2000. From 2000 to 2004, children were less likely to become uninsured as public-sector health coverage expanded. In 2005, that trend reversed and the number of uninsured children rose by 940,000 to over 8.6 million by 2006. This is the second year in a row that the rate of uninsured children has increased.

The safety net health programs—Medicaid and the State Children’s Health Insurance Program (SCHIP)—have kept millions of families insured when their employment-based benefits were lost. Unfortunately, medical inflation and state budget constraints have weakened this safety net. Congress has passed valuable legislation to strengthen SCHIP, however, President Bush vetoed their vote.¹ Had the bill passed, 3.8 million more children would have been covered by health insurance (CBO 2007).

While Medicaid and SCHIP still work for many, it is clear that the government has not picked up coverage for everybody who lost insurance. The weakening of this system—notably for children—is particularly difficult for workers and their families in a time when they are facing the challenges of stagnant incomes. Though increases in employer-provided health insurance premiums have slowed, they are still much higher than the rate of wage growth or overall inflation (KFF 2007). Even for middle- or high-income families, serious unexpected illness can lead to grave financial difficulty or bankruptcy (Himmelstein et al. 2005).

Given the erosion of employer-provided health insurance and rising costs of medical care, now is a critical time to consider health insurance reform.²

This report’s central findings include:

• The number of uninsured Americans rose by nearly 8.6 million, from 38.4 million in 2000 to 47.0 million in 2006. This increase was due primarily to the precipitous decline in employer-provided health coverage for workers and their families.

• Nearly 3.9 million fewer Americans under 65 had employer-provided coverage in 2006 than in 2000. As many as 14 million more people under 65 would have had employer-provided health insurance in 2006 if the coverage rate had remained at the 2000 level.

• The downward trend in the rate of employer-provided health insurance continued for the sixth year in a row, from 68.3% to 62.9%.

• Individuals among the bottom 20% of household income were the least likely to have employer coverage; 21.9% of the bottom income quintile were covered compared to 86.2% for people in the highest income quintile.

• Jobholders experienced a significant decline in health insurance coverage from 2000 to 2006. In 2000, 74.8% of workers had employer-provided coverage, whereas 70.8% of workers had coverage in 2006.

• No category of workers was insulated from loss of coverage. Even full-time workers, workers with a college degree, and workers in the highest wage quintile experienced declines in coverage between 2000 and 2006.

• Children experienced declines in employer-provided health insurance coverage in each of the last five years. In 2000, 65.9% of children had employer-provided coverage, whereas in 2006 only 59.7% did, a fall of over 6 percentage points. Public health insurance is no longer offsetting these losses: for the second year in a row, the rate of uninsured children has increased.

• Coverage rates in California are lower on average than the nation as a whole, but the negative trend from 2000 to 2006 is similar to the national trend. Nearly all of the losses in employment-based coverage occurred among children.

• The decline in employer coverage was pervasive and felt throughout the country. When comparing the 2000-01 and 2005-06 periods, 38 states experienced significant losses in employment-based coverage for the under 65 population, with Utah, South Carolina, Maryland, and Georgia experiencing losses in excess of 7 percentage points. No state experienced a significant increase in their employer-provided coverage rate.

Overall declines in coverage

Declines in employer-provided health insurance were the leading force behind the declines in overall health insurance coverage from 2000 to 2006. As shown in Table 1, losses in coverage among the under-65 population were driven by losses in coverage among adults.³ While the overall insurance rates among children were essentially unchanged, individuals between 18 and 64 years old experienced declines of 3.1 percentage points.

The overall losses in coverage were 2.3 percentage points from 2000 to 2006; employment-based coverage dropped at over twice that rate, falling 5.4 percentage points. In contrast to overall declines in coverage, losses in employment-based coverage were more equally split between adults and children. These losses are driving the increases in rates of uninsurance, moderated only by gains in public insurance and, in some cases, purchase in the private, nongroup market.

Table 2 examines employment-based coverage for non-elderly adults (18-64-year olds). Insurance losses for these individuals are driven by coverage through their own job rather than coverage as dependents (primarily spouses). Private wage and salary workers make up 76% of the workforce, and it is this group that has seen the largest losses in coverage. Workers with strong attachments to the labor force (about 89% of the private wage and salary workforce) are more likely to have coverage than marginally attached workers (58.7% vs. 13.9%). Surprisingly, it is these attached workers who have seen larger declines in coverage: 4.1 vs. 1.7 percentage point declines.

Declines in overall employer-provided coverage

About 3.9 million fewer people under the age of 65—including workers, their spouses, and their children—had employer-provided health insurance in 2006 than in 2000. The percent with employer-provided health insurance fell from 68.3% in 2000 to 62.9% in 2006, a decline of 5.4 percentage points (Table 3 ).

These declines in coverage occurred across all lines: by age, sex, race, education, and household income level. Some people, however, were more hurt than others by the declines. Those with only a high school education and those in the second-to-lowest household income quintile continue to be the hardest hit in the last five years. High school graduates were not only less likely than college graduates to have employer-provided insurance (57.1% vs. 80.3%), but they experienced declines in coverage twice as large (8.6 vs. 3.3 percentage-point drops).⁴

Health insurance coverage rates were also dramatically different by age, race, and ethnicity. Children under 18, adults 18-24 years old, and adults 25-54 years old experienced significant declines in employer-provided health coverage of 6.2, 5.0, and 6.1 percentage points, respectively. The lack of losses in employer-provided coverage for older Americans may be attributed to their increased employment-to-population ratios during this period. In 2006, 70.8% of whites had employer-provided coverage as compared to 51.7% of blacks and 40.9% of Hispanics. However, each of these groups experienced declines in coverage in excess of 4 percentage points.

Nativity also has a significant impact on the likelihood of having employer-provided health insurance: 65.1% of
natives had coverage in 2006 as compared to 48.1% of those who were foreign born. However, the decline in coverage was pervasive across both groups and the larger fall occurred among the native-born (5.3 vs. 4.1 percentage point drop).

The lowest rates of employer-provided coverage occurred within households with the lowest incomes. Only about one in five individuals in household in the bottom 20% of the income scale had employer-provided health insurance, whereas more than four in five individuals in households at the highest 20% of earners had such coverage (Figure A ). Individuals in households in the second quintile saw the largest declines in coverage. Their coverage rates fell 9.0 percentage points, from 61.7% in 2000 to 52.7% in 2006, which translates into nearly 3 million fewer Americans in the second quintile with employer-provided coverage.

While disparities in health insurance coverage by income have grown over time, no group is immune to the losses in employment-based coverage. In fact, it was individuals in the highest fifth of family income, who experienced the largest declines in coverage over the last year, a drop of 1.1 percentage points—equal to the amount it fell in the previous five years combined.

Declining coverage for workers

Employer-provided health insurance
The percent of workers with employer-provided health insurance coverage fell from 2005 to 2006, continuing the uninterrupted decline that began in 2000. As shown in Table 4, 70.8% of workers in 2006 had employer-provided health insurance either from their own or their spouse’s job, down from 71.2% the year before and down a total of 4.0 percentage points since 2000. Nearly 1.9 million fewer workers had employer-provided health insurance in 2006 than in 2000.

The loss of coverage was greater for men than women, as the coverage rate for working men with employer-provided insurance fell 4.9 percentage points compared to 2.9 points for women workers. Hispanic workers have the lowest coverage rates and experienced the largest declines from 2000 to 2006. Similarly, foreign born workers had significantly lower coverage rates than natives (54.2% vs. 73.9%) and experienced greater declines in coverage over the last year and the entire period.

About two-thirds (65.7%) of workers with a high school education were covered in 2006, whereas 82.7% of college-educated workers had employer-provided health coverage. This disparity reflects the fact that higher-skilled workers are likely to have higher-quality jobs that offer health benefits. That said, even college graduates have not been insulated from the decline in employer-provided health insurance. Nonetheless, workers with only a high school education still fared worse than those with a college degree (a decline of 6.1 vs. 2.6 percentage points, respectively).

Workers earning lower hourly wages are significantly less likely to have employer-provided health coverage than those earning higher wages; however, even those in the highest wage quintile were subjected to losses in coverage. Full-time workers are more likely to have employer-provided health insurance than part-time workers (73.9% vs. 55.3%). At the same time, over one-fourth of full-time workers, or about 32 million full-time workers, are not receiving employer-provided health insurance. These numbers have increase consistently over the last six years, and are up 5.5 million since 2000.

An important group of workers to examine more closely are workers who are significantly attached to the private sector labor force, defined as those who work in the private sector at least 20 hours per week and 26 weeks per year. While flat over the last year, the coverage rates for these workers have fallen since 2000 (Table 5 ). Only 55.0% of these steady workers receive health insurance from their own employer, down almost 4 percentage points since 2000.

White collar, blue collar, and service sector workers experienced declines in coverage. Service workers are insured at half the rate of white collar workers (28.9% vs. 61.4%), but blue-collar workers had the largest drop in coverage of 5.6 percentage points. Workers in larger firms are more likely to have employer-provided health insurance from their employer than workers in smaller firms. Only 40.1% of workers in small firms (firms of less than 100 employees) had employer-provided health insurance compared to 62.0% in firms with 100-499 employees and 66.6% in firms with greater than 500 employees. Workers in firms of all sizes lost coverage, but those in firms with less than 500 employees had the greatest declines since 2000.

Coverage rates in 2006 differ dramatically by the worker’s major industrial sector, however, all experienced declines since 2002.5 Workers in the two largest sectors—wholesale and retail trade and education, health, and social services—have coverage rates in 2006 of 51.8% and 58.4%, respectively. Manufacturing, another large sector, had a coverage rate of 70.9% in 2006, a decline of 1.7 percentage points from 2002. Manufacturing jobs have been falling as a share of total private sector jobs, as total employment in this sector declined 7% over this period. These high-quality jobs, as defined by a greater likelihood of providing health benefits, are declining both because fewer workers in the industry are getting benefits and because there are fewer workers in the industry than in previous years.

Uninsured workers
While the predominant form of health insurance for workers is through the workplace, some are eligible for Medicaid or Medicare and others may choose to purchase insurance in the private market. To best understand the growing insecurity of many working families, it is important to examine
the growth in the uninsured workforce. In 2006, 18.7% workers age 18-64 were uninsured (Table 6). These 27.6 million uninsured workers make up about 60% of the total uninsured population. Since 2000, the number of uninsured workers has grown an additional 2.8 percentage points (4.9 million workers).

Male workers are more likely to be uninsured and experienced a twice as large increase in their uninsured rate since 2000 than female workers. Hispanic workers have the highest uninsured rate of any other race/ethnicity, in fact, nearly twice as high at 42.0% (Table 6). Foreign-born workers are disproportionately more likely to be uninsured. They make up only 15.7% of the workforce, but 30.4% of uninsured workers (Table 7 ).

Uninsured workers tend to be younger. Nearly 29% of young workers (18-24 years old) are uninsured as compared to about 11% of workers age 55-64. The groups of young and older workers represent about 14% and 15% of the workforce respectively, but 21% and 9% of the uninsured workforce, respectively (Table 7).

Uninsurance among workers falls consistently with education, from 44.6% for those with less than a high school degree to 4.7% for those with graduate education. That is nearly a ten-fold increase in the uninsured rate between these two education groups. This disparity has increased over the last six years as the lowest educated group increased their percent uninsured by 5.3 percentage points compared to only a 0.8 percentage point increase for the highest educated group.

Uninsurance declines as wages rise (Figure B ). While 40.9% of workers in the lowest wage quintile were uninsured in 2006, only 6.2% of workers in the highest quintile were uninsured. Nearly 40% of uninsured workers fall in the lowest wage quintile, while a disproportionately small number of uninsured workers are middle or high income. Workers’ rates of uninsurance from 2000 to 2006 also declined as income rises. Workers in the lowest wage quintile experience an increase about eight times the amount experienced by those in the highest wage quintile (4.7 vs. 0.6 percentage points). Full-time workers have lower rates of uninsurance than part-timers, however, both declined significant amounts in the last six years.

Declining coverage for children

Most children (59.7%) receive health insurance through their parent’s job, however, 3.4 million fewer children had coverage in 2006 than in 2000. The rate of employer-provided health insurance for children fell 6.2 percentage points between 2000 and 2006. This drop occurred across all socio-economics group, as shown in Table 8.

While white, non-Hispanic children are the most likely to receive employment-based coverage, their coverage rates fell the greatest of any race or ethnic group. Similarly, native-born children have much higher coverage rates than foreign born (60.6% vs. 40.6%), but their coverage rates fell more dramatically from 2000 to 2006 than foreign-born children.

The results under the education heading assign each child the education level of their family head, as children under 18 rarely complete their education by that time. Children with parents of lower education attainment fare much worse than those with college or advanced degrees. Only 53.0% of children with high-school-educated parents have employer-provided health insurance as compared to 82.5% of children with college-educated parents. The declines in coverage from 2000 to 2006 were more than three times greater for the former group as well.

The unequal distribution of employer-provided health care is particularly revealing when children are ranked by their family’s income (Figure C ). In 2006, only 18.0% of children in the lowest income quintile were found to have employer-provided health insurance, compared with 86.3% of the children in the highest income quintile. In other words, children whose household incomes were in the top 20% were nearly five times more likely to have employer-provided health insurance than children in the lowest 20% of household income. This disparity has only been exacerbated over the past five years: the drop in coverage for those in the lowest income quintile was 6.9 percentage points, while the drop for those in the highest quintile was only 2.8 percentage points. The group hurt the worst, however, was children in the second lowest quintile; their coverage rates declined by 10.6 percentage points, from 54.6% to 44.0%.

The number of uninsured children rose 611,000 from 2005 to 2006, to a total of over 8.6 million uninsured children. The percent of uninsured children rose from 10.9% to 11.7%, a statistically significant increase. This is the second year in a row that the number and rate of uninsured children has grown. This unfortunate trend was caused by the confluence of two events. First, there has been a significant drop in the number of children covered by employer-provided health insurance. In the last two years, over 1 million fewer children had employer-provided health insurance. Second, there was a significant reversal in trend in the number of children insured by Medicaid or SCHIP in 2005 and public coverage of children has just returned to the level it was two years ago. In previous years, the strength of government programs aimed at children kept many from falling into the ranks of the uninsured, keeping them better insulated from the losses in employer-provided coverage. The safety net does not appear to be catching as many children as in the past.

State coverage: an analysis of California

While national analyses are interesting, much change has happened with health insurance at the state level. Massachusetts has enacted universal coverage legislation and other states are considering similar measures. California is a useful state to examine as a microcosm of the United States as a whole. It is representative with its large population, but has particular challenges to overcome, including low rates of insurance and high levels of immigration. California was one of the first states to grapple with universal coverage, has conducted recent innovations in cities, and has considered policies to expand coverage from both republican and democratic politicians in the past year. This portion of the report is dedicated to examining recent trends in insurance for California.

Coverage among the under-65 population in California
Nearly 18 million non-elderly Californians had employer-provided health insurance coverage in 2006, higher than any other state. However, this number is mostly a byproduct of the sheer size of the state population and masks the fact that California has one of the lowest coverage rates in the country. Its rate of 55.5% in 2006 ranks below 45 states and the District of Columbia. As shown in Table 9, the decline in coverage from 2000-06 parallels the average declines across the country (5.3 vs. 5.4 percentage points).

The lowest rates are among young adults, but the largest losses were among children and those 25-54 years old. Greater losses in coverage among men from 2000 to 2006 caused the percent of men covered to fall below the rate of women. Trends by race and nativity track closely those across the United States; ho
wever, trends by education and household income tell a different story. While Californians with lower education and lower income have significantly lower rates of coverage than those at the top, even those who traditionally have been shielded from declines in coverage experienced large declines. The rates of coverage for those with post-college education fell 7.1 percentage points. The middle fifth (40-60% of income) and the upper-middle fifth (60-80% of income) fell 7.4 and 8.6 percentage points, respectively.

Employment-based coverage for workers and uninsured workers in California
Similar to the population as a whole, employer-provided health insurance among workers was lower in California than the United States (63.6% vs. 70.8%), but the percentage point change from 2000 to 2006 was the same (see Table 10). Working men felt the losses most dramatically, with declines of 6.3 percentage points compared with 1.0 percentage points for working women. Similarly, foreign-born workers had lower rates of coverage and larger declines in coverage than native-born workers. Workers with more education and higher income have significantly higher rates of coverage, however, the losses in coverage were felt across the distribution. Even workers in the highest wage fifth and full-time workers experienced declines in coverage from 2000 to 2006.

While sample size constraints restrict comparison of strongly attached workers across years, Table 11 offers important information about the distribution of coverage by occupation, firm size, and industry in California. Just over half of all workers with strong attachments to the labor force have insurance through their own job. White-collar workers are most likely to have such coverage (62.7%) as compared to blue-collar workers (44.0%) and service sector workers (28.8%). Workers in larger firms have much higher coverage rates than those in small firms. Workers in the information sector and in manufacturing have the highest rates of coverage, in fact, rates twice as high as those working in arts, entertainment, recreation, accommodation and food services, and other services.

Children’s insurance coverage in California
The majority of losses in employment-based coverage in California fell among the children. Over 600,000 fewer children had employer-provided health insurance in 2006 than in 2000. As shown in Table 12, just over half (51.9%) of all California children had this insurance compared with 59.7% nationally.

Children across socio-economic categories have experienced declines in coverage. White, non-Hispanic children had 9.6 percentage point declines in coverage from 2000 to 2006, larger than any other group. Native-born kids, while enjoying higher rates of coverage than the foreign born, had faster falling coverage rates (6.9 vs. 4.3 percentage points). Education and income have typically insulated families from losses in coverage, but this did not occur during this period. Higher education and income are related to much higher rates of coverage, but the losses occurred across the spectrum.

These declines in employment-based coverage have significantly contributed to large numbers of uninsured children, over 1.2 million uninsured kids in 2006. Uninsured children have a significantly negative impact on the community, business, and the public insurance system (Gould 2007). More uninsured children make a strong case for expansion of SCHIP and other public insurance programs.

Coverage across the states

While the majority of states experienced significant declines in employer-provided coverage for the under-65 population between the 2000-01 and 2005-06 periods, the level and extent of coverage loss varied by state, as shown in Table 13. The states with the highest employer-provided coverage rates in the merged 2005-06 years were New Hampshire (75.6%), Connecticut (72.3%), and New Jersey (72.1%). The lowest coverage rates were found in New Mexico (52.9%) and Texas (54.6%). Thirty-seven states experienced significant losses in coverage. Utah, South Carolina, Maryland, and Georgia experienced losses in excess of 7 percentage points. No state experienced a significant increase in their coverage rate.

Table 14 displays the coverage levels and rates for workers who are significantly attached to the private-sector labor force and receive employer-provided coverage from their own job. The state with the highest rate of employer-provided coverage among workers was Hawaii, with a coverage rate in 2005-06 of 70.9%, far exceeding the national average of 55.0%. This is likely because Hawaii has a government mandate requiring employers to provide health insurance to their workers who work at least 20 hours per week. The largest declines in coverage for workers between 2000-01 and 2005-06 were in New Jersey and Georgia with declines of 8.9 and 7.5 percentage points, respectively. As with the under-65 population, there is no state with a statistically significant increase in its coverage rate for workers.

State-by-state employer-provided coverage levels and rates for children are displayed in Table 15. The highest rates of employer-provided coverage for children in 2005-06 were in New Hampshire (77.1%), Massachusetts (72.4%), and Minnesota (72.1%). At the same time, the District of Columbia, Mississippi, New Mexico, and Texas covered less than half their children with employer-provided health insurance. From 2000-01 to 2005-06, 23 states experienced significant losses in coverage while losses in Wisconsin, Vermont, Utah, Missouri, and Georgia exceeded 10 percentage points each. Again, no state had a statistically significant increase in children’s coverage from 2000-01 to 2005-06.

Conclusion

Social insurance is intended to insulate people from negative shocks such as job loss, illness, or natural disaster. Public insurance is intended to provide a safety net to people who have limited access to private insurance markets. Clearly, there are many Americans who fall through the growing gulf between employer-provided coverage and government health programs. A universal system, one that provides a minimum standard of care to everyone, would provide Americans with access to the type of health care appropriate for the most prosperous nation in the world. Taking insurance out of the job market and into the public sector has the potential to provide a stronger safety net, particularly during times of weak labor growth. More Americans would have steadier insurance access and increase their ability to get regular medical care.

From 2000 to 2006, the United States saw a substantial rise in the number of uninsured people. A continued decline in those with employer-provided health insurance, along with a weakening of the health insurance safety net, will undoubtedly leave more Americans without coverage and access to adequate health care.

— The author thanks Jin Dai and James Lin for their research assistance and Liana Fox for her valuable state-level contributions to this Briefing Paper. EPI thanks the California Endowment, the Ford Foundation, the Charles Stewart Mott Foundation, the Open Society Instit
ute, the Bernard and Audre Rapoport Foundation, and the Rockefeller Foundation for their support of this research.

Endnotes

1. Opponents of SCHIP expansion argue that the availability of a public insurance option leads parents to voluntarily drop private coverage and shift their children’s coverage to the public sector. As shown in an EPI Economic Snapshot (http://www.epi.org/content.cfm/webfeatures_snapshots_20070912), research shows very little of such “crowding out” actually occurs. The large majority of SCHIP recipients—86%—were either not covered six months before entering SCHIP or had lost private coverage within six months prior to enrolling.

2. The Economic Policy Institute, as part of its Agenda for Shared Pr osperity, has put forth one such solution. See http://www.sharedprosperity.org/bp180.html for details of this plan.

3. The over-65 population is not helpful to this analysis because of their nearly 100% coverage rates through Medicare.

4. In this analysis, children under 18 are assigned the education level of their family head.

5. Insurance by industrial sectors can only be accurately compared back to 2002 due to changes in industry classifications in the data.

References

Congressional Budget Office. 2007. CBO’s Estimate of Changes in SCHIP and Medicaid Enrollment of Children Under the House Amendments to the Senate Amendments to H.R. 976, the Children’s Health Insurance Program Reauthorization Act of 2007. Washington, D.C.: CBO. September 24.

Gould, Elise. 2007. California Kids Lose Employment-Based Coverage: The Impact on the Community, Business, and the Public Insurance System. Economic Policy Institute Briefing Paper #199. Washington, D.C.: EPI.

Himmelstein, David U., Elizabeth Warren, Deborah Thorne, and Steffie Woolhandler. 2005. Illness and Injury as Contributors to Bankruptcy. Health Affairs Web Exclusive.

Kaiser Family Foundation and The Health Research and Educational Trust. 2007. Employer Health Benefits 2007: Annual Survey. Menlo Park, Calif.: Kaiser Family Foundation.

Health insurance eroding for working families

Employer-provided coverage declines for fifth consecutive year

by  Elise Gould 

More Americans are uninsured because of the continued erosion in employer-provided health insurance, the most prominent form of U.S. health insurance. The number of people without health insurance grew significantly for the fifth year in a row. Nearly 46.6 million Americans were uninsured in 2005—up almost 7 million since 2000. The rate of those without insurance has grown 1.7 percentage points during this period, from 14.2% in 2000 to 15.9% in 2005.

The percent of people with employer-provided health insurance also fell for the fifth year in a row, 4.1 percentage points in total. Over 3 million fewer people of all ages had employer-provided insurance in 2005 than in 2000 as a result of rising health costs coupled with weak labor demand. However, this decline does not take into account population growth. As many as 9 million more people would have had employer-provided health insurance in 2005 if the coverage rate had remained at the 2000 level.

Because of these large declines in employer-provided health insurance, workers and their families have been falling into the ranks of the uninsured at alarming rates. There were almost 4 million more uninsured workers in 2005 than in 2000. While uninsured workers are disproportionately young, non-white, less educated, and low-wage, workers across the socio-economic spectrum have experienced losses in coverage. Men lost coverage at nearly twice the rate of women, as did non-Hispanic whites over blacks. Even the most highly educated and highest wage workers had lower rates of insurance coverage in 2005 than in 2000.

As with workers, the downward trend in employer-provided coverage for children continued into 2005. In the previous four years, children were less likely to become uninsured as public-sector health coverage expanded. This year that trend reversed and the number of uninsured children rose 361,000 to 8.3 million in 2005. This is the first time in seven years that the rate of uninsured children has increased.

The safety net health programs—Medicaid and the State Children’s Health Insurance Program (SCHIP)—have kept millions of families insured when their employment-based benefits were lost. Unfortunately, medical inflation and state budget constraints have weakened this safety net.

While Medicaid and SCHIP still work for many, it is clear that the government has not picked up coverage for everybody who lost insurance. The weakening of this system—notably for children—is particularly difficult for workers and their families in a time when they are facing the challenges of stagnant incomes. Furthermore, these programs are simply not designed to assist low income adults or middle or high income families from becoming uninsured. Even for middle or high income families, serious unexpected illness can lead to grave financial difficulty or bankruptcy.

The employer market has been the primary method of obtaining health insurance in this country. Its strength lies in the effective sharing of risk among individuals. Unfortunately, labor market pressures and rising medical care inflation are weakening this system. In a weak labor market, workers may lose their jobs or be forced to take jobs without benefits and lose their already tenuous connection to the employer-provided health insurance system. During periods of weak labor demand, workers do not have the bargaining power to bid up their wages or benefits. During a period of simultaneous weak bargaining power and rising health costs, employers demand that workers pay for higher premiums or pay more out-of-pocket for their care. This shift is occurring in a period when capital’s share of corporate income was the highest in nearly 40 years. Furthermore, by pushing workers out of the employer system and into the public one, employers are shifting the cost of insuring their workers onto taxpayers.

The government at both the federal and state level have responded to medical inflation with policy changes that reduce public insurance eligibility or with proposals to reduce government costs. Budget crises at the state level are putting Medicaid and SCHIP funding at risk. Simultaneously, policy proposals at the federal level either to lessen the tax advantage of workplace insurance or to encourage a private purchase system could further destabilize an already weakening employer-provided health insurance system.

Given the erosion of employer-provided health insurance and rising costs of medical care, now is a critical time to consider health insurance reform. There are several promising solutions that would increase access to affordable health care. The key to all of the policies is creating large, varied, and stable risk pools.

This report’s central findings regarding health insurance coverage include:

• The number of uninsured Americans rose by nearly 7 million, from 39.8 million in 2000 to 46.6 million in 2005. This increase was due primarily to the precipitous decline in employer-provided health coverage for workers and their families.
• Nearly 4.5 million fewer Americans under 65 had employer-provided coverage in 2005 than in 2000. As many as 8.2 million more people under 65 would have had employer-provided health insurance in 2005 if the coverage rate had remained at the 2000 level.
• The downward trend in the rate of employer-provided health insurance continued from 2004 to 2005, during a period in which the economy created over 2 million jobs.
• Individuals among the bottom 20% of household income were the least likely to have employer coverage; 21.9% of the bottom income quintile were covered compared to 86.4% for workers in the highest income quintile.
• Jobholders experienced a significant decline in health insurance coverage from 2000 to 2005. In 2000, 74.2% of workers had employer-provided coverage, whereas 70.5% of workers had coverage in 2005.
• No category of workers was insulated from loss of coverage. Even full-time workers, workers with a college degree, and workers in the highest wage quintile experienced declines in coverage between 2000 and 2005.
• Children experienced declines in employer-provided health insurance coverage in each of the last five years. In 2000, 65.6% of children had employer-provided coverage, whereas in 2005 only 60.5% did, a fall of over 5 percentage points. Fewer children had Medicaid or SCHIP in 2005 than in 2004. For the first time since 1998, the rate of uninsured children has increased.
• There is a market increase in health insurance inequality as the drop in employer-provided coverage for children in the lowest household income quintile was 6.6 percentage points while the drop for those in the highest quintile was only 0.1 percentage points between 2000 and 2005.
• The decline in employer coverage was pervasive and felt throughout the country. When comparing the 1999-2000 and 2004-05 periods, 34 states experienced significant losses in coverage with Indiana, Utah, Maryland, and Missouri experiencing losses in excess of 8 percentage points. No state experienced a significant increase in their employer-provided coverage rate.

Declines in overall employer-provided coverage

About 4.4 million fewer people under the age of 65—including work
ers, their spouses, and their children—had employer-provided health insurance in 2005 than in 2000. The percent with employer-provided health insurance fell from 67.7% in 2000 to 62.8% in 2005, a decline of 5.0 percentage points.

As shown in Table 1, these declines in coverage occurred across all lines: by age, sex, race, education, and household income level. Some people, however, were more hurt than others by the declines. Those with only a high school education and those in the second-to-lowest household income quintile were the hardest hit in the last five years. High school graduates were not only less likely than college graduates to have employer-provided insurance (57.7% vs. 79.4%), but they experienced declines in coverage twice as large (7.3 vs. 3.6 percentage-point drops).¹

Health insurance coverage rates were also dramatically different by age, race, and ethnicity. Children under 18, adults 18-24 years old, and adults 25-54 years old experienced significant declines in employer-provided health coverage of 5.1, 5.6, and 5.8 percentage points, respectively. The lack of losses in employer-provided coverage for older Americans may be attributed to their increased employment-to-population ratios during this period. In 2005, 70.4% of whites had employer-provided coverage as compared to 50.8% of blacks and 41.6% of Hispanics. Nearly a million fewer black Americans had employer coverage in 2005 than in 2000. Blacks and Hispanics also experienced larger declines in coverage over the past year.

The lowest rates of employer-provided coverage occurred within households with the lowest incomes. Only about one in five individuals in household in the bottom 20% of the income scale had employer-provided health insurance, whereas more than four in five individuals in households at the highest 20% of earners had such coverage (Figure A). Individuals in households in the second quintile saw the largest declines in coverage. Their coverage rates fell 8.2 percentage points, from 61.2% in 2000 to 53.0% in 2005, which translates into 3 million fewer Americans in the second quintile with employer-provided coverage. It was individuals in the middle fifth of household income, however, who experienced the largest declines in coverage over the last year, a drop of 1.6 percentage points.

Declining coverage for workers

Employer-provided health insurance 
The percent of workers with employer-provided health insurance coverage fell from 2004 to 2005, continuing the uninterrupted decline that began in 2000. As shown in Table 2, 70.5% of workers in 2005 had employer-provided health insurance either from their own or their spouse’s job, down from 70.9% the year before and down a total of 3.7 percentage points since 2000. Nearly 2.8 million fewer workers had employer-provided health insurance in 2005 than in 2000.

The loss of coverage was greater for men than women, as the coverage rate for working men with employer-provided insurance fell 4.4 percentage points compared to 2.8 points for women workers. About two-thirds of workers with a high school education were covered in 2005, whereas 81.6% of college-educated workers had employer-provided health coverage. This disparity reflects the fact that higher-skilled workers are likely to have higher-quality jobs that offer health benefits. That said, even college graduates have not been insulated from the decline in employer-provided health insurance. Nonetheless, workers with only a high school education still fared worse than those with a college degree (a decline of 5.6 vs. 3.0 percentage points).

Workers earning lower hourly wages are significantly less likely to have employer-provided health coverage than those earning higher wages; however, even those in the highest wage quintile were subjected to losses in coverage. Full-time workers are more likely to have employer-provided health insurance than part-time workers (73.7% vs. 55.0%). At the same time, over one-fourth of full-time workers, or nearly 32 million full-time workers, are not receiving employer-provided health insurance. These numbers have also been increasing consistently over the last five years.

An important group of workers to examine more closely are workers who are significantly attached to the private sector labor force, defined as those who work in the private sector at least 20 hours per week and 26 weeks per year. The coverage trends for these workers have also fallen over the last year, continuing a steady climb downwards (Table 3). Less than 55% of these steady workers receive health insurance from their own employer, down almost 4 percentage points since 2000.

White collar, blue collar, and service sector workers experienced declines in coverage, but service workers are insured at the lowest rates (28.7%) and experienced the greatest drop (5.3 percentage points). Blue collar workers experienced the largest decline over the last year, a drop of 3.2 percentage points. Workers in larger firms are more likely to have employer-provided health insurance from their employer than workers in smaller firms. Only 40.4% of workers in small firms (firms of less than 100 employees, which represent about 42% of the workforce) had employer-provided health insurance compared with over 60% in firms greater than 100 employees. Workers in firms of all sizes lost coverage, but those in firms with more than 100 but less than 500 employees had the greatest declines over the last year and since 2000.

Coverage rates in 2005 differ dramatically by the worker’s major industrial sector. Workers in the largest sectors—wholesale and retail trade and education, health, and social services (18%, and 16%, respectively, of the total private workforce in 2005)—have coverage rates between 52% and 58%. Workers in these sectors experienced declines in coverage of about 2 percentage points since 2002. Manufacturing, another large sector, had a coverage rate of 71.2% in 2005, a decline of 1.5 percentage points from 2002. Manufacturing jobs have been falling as a share of total private sector jobs, as total employment in this sector declined 7% over this period. These high quality jobs, as defined by a greater likelihood of providing health benefits, are declining both because less workers in the industry are getting benefits and because there are fewer workers in the industry than in previous years.

Uninsured workers 
While the predominant form of health insurance for workers is through the workplace, some are eligible for Medicaid or Medicare and others may choose to purchase in the private market. To best understand the growing insecurity of many working families, it’s important to examine the growth in the uninsured workforce. In 2005, 18.7% workers 18-64 years old were uninsured (Table 4). These 27.3 million uninsured workers make up about 60% of the total uninsured population. Since 2000, the number of uninsured workers has grown an additional 2.2 percentage points (3.8 million workers).

Uninsured worker
s tend to be younger. Nearly 30% of young workers (18-24 years old) are uninsured as compared to about 12% of workers age 55-64. The groups of young and older workers represent about 14% of the workforce each, but 22% and 9% of the uninsured workforce, respectively (Table 5).

Male workers are more likely to be uninsured and experienced a larger increase in their uninsured rate since 2000 than female workers. Hispanic workers have the highest uninsured rate of any other race/ethnicity, in fact, nearly twice as high. Almost 40% of Hispanic workers are uninsured. Uninsurance among workers falls consistently with education from 42.7% for those with less than a high school degree to 5.1% for those with graduate education.

Uninsurance declines as wages rise (Figure B). While 40.4% of workers in the lowest wage quintile are uninsured, only 7.1% of workers in the highest quintile are. Nearly 40% of uninsured workers fall in the lowest wage quintile, while a disproportionately small number of uninsured workers are middle or high income. Workers’ rates of uninsurance from 2000 to 2005 also decline with income. Workers in the lowest wage quintile experience an increase over six times the amount experienced by those in the highest wage quintile (3.9 vs. 0.6). Full-time workers have lower rates of uninsurance than part-timers, however, both declined significant amounts in the last five years.

Declining coverage for children

Most children receive health insurance through their parent’s job. The rate of employer-provided health insurance for children fell 5.1 percentage points between 2000 and 2005, a decline from 65.6% to 60.5%. This drop occurred across all socio-economics group, as shown in Table 6.

Ranking children by their household’s income is particularly revealing of the unequal distribution of employer-provided health care (Figure C). Only 17.7% of children in the lowest income quintile were found to have employer-provided health insurance, compared with 88.7% of the children in the highest income quintile. In other words, children whose household incomes were in the top 20% were nearly five times more likely to have employer-provided health insurance than children in the lowest 20% of household income. This disparity has only been exacerbated over the past five years: the drop in coverage for those in the lowest income quintile was 6.6 percentage points, while the drop for those in the highest quintile was only 0.1 percentage points. The group hurt the worst, however, was children in the second lowest quintile; their coverage rates declined by 9.7 percentage points, from 54.3% to 44.6%.

The second set of numbers in Table 6 assign each child the education level of their family head. Children with parents of lower education attainment fare much worse than those with college or advanced degrees. Only about 55.0% of children with high-school-educated parents have employer-provided health insurance as compared to 83.1% of children with college-educated parents. The declines in coverage from 2000 to 2005 were more than three times greater for the former group as well.

The number of uninsured children rose 361,000 from 2004 to 2005 to a total of 8.3 million uninsured children. The percent of uninsured children rose from 10.8% to 11.2%, a statistically significant increase. This is the first time the uninsured rate has increased since 1998. This unfortunate turnaround in the number and percent of uninsured children was caused by the confluence of two events. First, there has been a significant drop in the number of children covered by employer-provided health insurance. In the last year alone, nearly 300,000 fewer children had employer-provided health insurance. Second, there has been a significant reversal in trend in the number of children insured by Medicaid or SCHIP in the last year. Nearly 1%, or 184,000, fewer children had Medicaid or SCHIP in 2005 than in 2004. In previous years, the strength of government programs aimed at children kept many from falling into the ranks of the uninsured, keeping them better insulated from the losses in employer-provided coverage. This phenomenon and the recent reversal in trend is illustrated in Figure D. The safety net does not appear to be catching as many children as in the past.

Coverage by state

While the majority of states experienced significant declines in employer-provided coverage for the under-65 population between the 1999-2000 and 2004-05 periods, the level and extent of coverage loss varied by state, as shown in Table 7. The states with the highest employer-provided coverage rates in the merged 2004-05 years were New Hampshire (76.7%), Minnesota (73.0%), and New Jersey (72.4%). The lowest coverage rates were found in New Mexico (52.9%), Montana (54.6%), and Texas (55.1%). Thirty-four states experienced significant losses in coverage with Indiana, Utah, Maryland, and Missouri experiencing losses in excess of 8 percentage points. No state experienced a significant increase in their coverage rate.

Table 8 displays the coverage levels and rates for workers who are significantly attached to the private sector labor force and receive employer-provided coverage from their own job. The state with the highest rate of employer-provided coverage among workers was Hawaii, with a coverage rate in 2004-05 of 69.9%. This is likely due to the fact that Hawaii has a government mandate requiring employers to provide health insurance to their workers who work at least 20 hours per week. The largest declines in coverage for workers between 1999-2000 and 2004-05 were in Arkansas and New Jersey, with declines over 7 percentage points. As with the under-65 population, there is no state with a statistically significant increase in its coverage rate for workers.

State-by-state employer-provided coverage levels and rates for children are displayed in Table 9. The highest rates of employer-provided coverage for children were in New Hampshire (78.2%), Minnesota (74.0%), and New Jersey (73.0%). New Mexico, Mississippi, and the District of Columbia cover less than half their children with employer-provided health insurance. Indiana and Mississippi experienced significant declines in coverage rates in excess of 11 percentage points. Massachusetts was the only state that significantly increased its coverage rate from 1999-2000 to 2004-05.

Conclusion

Social insurance is intended to insulate people from negative shocks such as job loss, illness, or natural disaster. Public insurance is intended to provide a safety net to people who have limited access to private insurance markets. Clearly, there are many Americans who fall through the growing gulf between employer-provided coverage and government health programs. A universal system, one tha
t provides a minimum standard of care to everyone, would provide Americans with access to the type of health care appropriate for the most prosperous nation in the world. Taking insurance out of the job market and into the public sector has the potential to provide a stronger safety net, particularly during times of weak labor growth. This can lead more Americans to have steadier insurance access and increase their ability to secure regular medical care.

From 2000 to 2005, this country saw a substantial rise in the number of uninsured. A continued decline in those with employer-provided health insurance along with a weakening of the health insurance safety net will undoubtedly cause more and more Americans to lose coverage and therefore access to adequate health care.

The author thanks Jin Dai and Rob Gray for their research assistance on this Briefing Paper. EPI thanks the Ford Foundation, the Rockefeller Foundation, the Charles Stewart Mott Foundation, the Annie E. Casey Foundation, the Joyce Foundation, the Charles D. & Catherine T. MacArthur Foundation, and the Open Society Institute for their support of this research.

Endnotes

1. In this analysis, children under 18 are assigned the education level of their family head.

What the overall uninsured numbers mask, however, is a distinct shift from insurance coverage through the private sector to insurance coverage through the public sector, particularly for children. The safety net health programs—Medicaid and the State Children’s Health Insurance Program (SCHIP)—have kept millions of families insured when their employment-based benefits were lost.

The percent of people with employer-provided health insurance also fell for the fourth year in a row. Nearly 3.7 million fewer people had employer-provided insurance in 2004 than in 2000. However, that decline in the number of people with employer-provided insurance does not take into account population growth. As many as 11 million more people would have had employer-provided health insurance in 2004 if the coverage rate had remained at the 2000 level. The rate during this period declined from 63.6% to 59.8% (a 3.8 percentage-point drop). At the same time, the Medicaid rolls (including SCHIP) have increased by nearly eight million, with a coverage increase of 2.3 percentage points.

This phenomenon of replacing employer-provided health insurance with public-sector health coverage begs the question: is this a positive way to meet the United States’ health care challenges? On a positive note, this trend demonstrates that the safety net is working for a small share of the population. Workers and their families at the low end of the income distribution have limited if any access to employer-provided insurance. During a weak labor market, millions of workers lose their jobs or are forced to take jobs without benefits and lose their already tenuous connection to the employer-provided health insurance system. Medicaid and SCHIP have saved millions from financial ruin or untreated illness.

On the down side, the government did not pick up coverage for everybody who lost insurance. Current public insurance programs are particularly strong at covering children, the elderly, and people with disabilities, but many Americans have been left out, including many in the middle class who lost coverage at a time when such workers already face the challenges of a weak labor market and stagnant wages. While most children were able to make up their losses in employer health coverage through the public system, many prime-age working adults were left stranded by the drop in coverage and fell into the ranks of the uninsured. Middle-income Americans between the ages of 25 and 54 were 26.7% more likely to be uninsured in 2004 than in 2000.

The employer market has been the primary method of obtaining health insurance in this country. Its strength lies in the effective sharing of risk among individuals. Unfortunately, market pressures are exacerbating the problem. During periods of weak labor demand, workers do not have the bargaining power to bid up their wages or benefits. During a period of simultaneous weak bargaining power and rising health costs, employers demand that workers pay for higher premiums or pay more out-of-pocket for their care. Furthermore, by pushing workers out of the employer system and into the public one, employers are shifting the cost of insuring their workers onto taxpayers.

While some employers have transferred the responsibility of insuring their employees onto the public system (or have simply let these workers drop into the ranks of the uninsured), some local governments have begun to adopt a “pay-or-play”* strategy to keep employers accountable to their workers’ needs.¹ However, these helpful policies currently exist only in very select areas at the local level. On the federal level, policies are actually making such accountability measures harder. Sweeping cuts in the tax benefits of employer-provided health insurance are being considered by President Bush’s tax advisory commission,2 changes that could substantially destabilize an already weakened health insurance system.

To add insult to injury, Congress appears poised to cut Medicaid and other related safety net programs by $35 billion.³ Policy measures that cut holes in the safety net even as employer-provided coverage is declining will be detrimental to the health care of this country. Limited access to affordable health insurance markets will cause the number of uninsured to rise, leading to inadequate access to health care. More people will continue to fall through the cracks if the employer-system is weakened without a sufficient replacement.

This report’s central findings regarding health insurance coverage include:

• The number of uninsured Americans rose by over six million, from 39.8 million in 2000 to 45.8 million in 2004. This increase was due primarily to the precipitous decline in employer-provided health coverage for workers and their families.
• The downward trend in the rate of employer-provided health insurance continued from 2003 to 2004, during a period in which the economy created 1.5 million jobs—either many of these new jobs did not include health coverage or existing jobs shed coverage during the year (or both).
• Jobholders experienced a significant decline in health insurance coverage from 2000 to 2004. In 2000, 58.9% of workers had employer-provided coverage, whereas only 55.9% of workers had coverage in 2004.
• No category of workers was insulated from loss of coverage. Even full-time, full-year workers and workers with a college degree experienced declines in coverage between 2000 and 2004. Full-time, full-year workers’ coverage rates fell by 2.3 percentage points and college graduates’ coverage rates fell by 2.8 percentage points.
• Workers among the bottom 20% of hourly wage earners were the least likely to have employer coverage; 24.4% of the bottom quintile were covered compared to 77.5% for workers in the highest wage quintile.
• Children experienced the sharpest declines in employer-provided health insurance coverage. In 2000, 65.6% of children had employer-provided coverage, whereas in 2004 only 60.8% did, a fall of nearly five percentage points. Fortunately, existing government insurance (i.e., Medicaid and State Children’s Health Insurance Programs) increased coverage to children by six percentage points, enough to offset the sharp decline in employer coverage for this group.
• Unlike the trend with children, the fall in employer-provided coverage for prime-age working adults was not accompanied by a sufficient increase in public coverage.
• The decline in employer coverage was pervasive and felt throughout the country. When comparing the 1999-2000 and 2003-04 periods, Maryland, Maine, Missouri, North Carolina, and Wisconsin all experienced losses in coverage rates in excess of 6.0 percentage points. Not a single state experienced a statistically significant increase in coverage.

Declines in overall employer-provided coverage

About 3.7 million people—including workers, their spouses, and their children—lost employer-provided health insurance between 2000 and 2004. The percent with employer-provided health insurance fell from 63.6% in 2000 to 59.8% in 2004, a decline of 3.8 percentage points.

As shown in Table 1, these declines in coverage occurred across all lines: by age, sex, race, education, and family income level. Some people, however, were more hurt than others by the declines. Those with only a high school education and those in the second-to-lowest family income quintile were the hardest hit in the last four years. High school graduates were not only less likely than college graduates to have employer-provided insurance (55.3% vs. 77.5%), but they experienced much greater declines (5.6 vs. 2.6 percentage-point drops). (In this analysis, children under 18 are assigned the education level of their family head.)

Health insurance coverage rates were also dramatically different by age and by race and ethnicity. Children under 18, adults 18-24 years old, and adults 25-54 years old experienced significant declines in employer-provided health coverage of 4.8, 6.4, and 5.1 percentage points, respectively. The rise in employer-provided coverage for older Americans may be attributed to their increased employment-to-population ratios during this period. In 2004, 65.7% of whites had employer-provided coverage as compared to 49.9% of blacks and 41.1% of Hispanics.

The lowest rates of employer-provided coverage occurred within families with the lowest incomes. Only about one in five individuals in families in the bottom 20% of earners had employer-provided health insurance, whereas more than four in five individuals in families at the highest 20% of earners had such coverage. Individuals in families in the second quintile, those with approximately $20,000-38,000 in yearly income, saw the largest declines in coverage. Their coverage rates fell 7.0 percentage points, from 54.6% in 2000 to 47.6% in 2004. While over half of the individuals in these families had coverage in 2000, fewer than half had coverage by 2004.

Declining coverage for workers

The percent of workers with employer-provided health insurance coverage fell from 2003 to 2004, continuing the uninterrupted decline that began in 2000. As shown in Table 2, 55.9% of workers who worked at least 20 hours per week and 26 weeks per year received employer-provided health insurance from their own employer, down from 56.4% the year before and down a total of 2.9 percentage points since 2000.

The loss of coverage was greater for men than women, as the coverage rate for working men with employer-provided insurance fell 4.4 percentage points compared to 1.1 points for women workers. Working men, however, still had higher coverage rates than women in 2004 (58.7% vs. 52.5%).

Only 52.5% of workers with a high school education were covered in 2004, whereas 68.5% of college-educated workers had employer-provided health coverage. This disparity reflects the fact that higher-skilled workers are likely to have higher-quality jobs that offer health benefits. That said, even college graduates have not been insulated from the decline in employer-provided health insurance. Nonetheless, workers with only a high school education still fared worse than those with a college degree (a decline of 3.7 vs. 2.8 percentage points).

Workers earning lower hourly wages are significantly less likely to have employer-provided health coverage than those earning higher wages. In 2004, workers in the highest wage quintile were more than three times as likely to have employer-provided health insurance than workers in the lowest quintile (77.5% vs. 24.4%). The decline in employer-provided health insurance from 2000 to 2004 pervaded the entire wage scale, but the number of insured workers with wages in the second quintile (20-40%) fell the most (a drop of 4.9 percentage points). This vulnerable population is likely to have income too high to qualify for public insurance.

Both white collar and blue collar workers experienced declines in coverage, but blue collar workers are insured at lower rates (54.9% vs. 62.4%) and experienced a greater drop (4.1 vs. 2.6 percentage points). Even workers who worked full time and year round had significant declines in coverage between 2000 and 2004. In 2000, 66.2% of full-time, full-year workers had coverage. By 2004, coverage for this group had declined 2.3 percentage points to 63.9%.

Coverage rates in 2004 differ dramatically by the worker’s major industrial sector. As shown in Table 3, the agricultural, arts, and other services industries display the lowest rates—all below 40%of providing health insurance to their workers. On the other side, mining, manufacturing, and the information sectors all have significantly higher-than-average rates (all above 70%) of insurance coverage. The remaining six major industrial classifications fall within the mid-range. (Accurate comparisons cannot be traced back to 2000 as the sectoral categories changed in 2002.)

Declining coverage for children

Employer-provided coverage fell further for children than for any other age group (see Table 4). While overall employer coverage fell from 63.6% to 59.8%, the decline in employer-provided insurance that covered children fell from 65.6% to 60.8%, a drop of 4.8 percentage points. Ranking children by their family’s income is particularly revealing of the unequal distribution of employer-provided health care (Figure A). Only 18.2% of children in the lowest income quintile were found to have employer-provided health insurance, compared with 87.4% of the children in the highest income quintile. In other words, children whose family incomes were in the top 20% were nearly five times more likely to have employer-provided health insurance than children in the lowest 20% of family income. This disparity has only been exacerbated over the past four years: the drop in coverage for those in the lowest income quintile was over four times that for children in the highest quintile. The group hurt the worst, however, was children in the second lowest quintile; their coverage rates declined by 8.5 percentage points, from 54.3% to 45.8%.

The last set of numbers in Table 4 assign each child the education level of their family head. Children with parents of lower education attainment fare much worse than those with college or advanced degrees. Only about 56.4% of children with high-school-educated parents have employer-provided health insurance as compared to 83.1% of children with college-educated parents. The declines in coverage from 2000 to 2004 were much worse for the former group as well.

In many ways, children fared the worst of any group in terms of employer-provided health coverage, but the strength of government programs aimed at children kept many from falling into the ranks of the uninsured. As shown in Figure B, growth in enrollment in both Medicaid and SCHIP increased the percent of children covered from 20.9% to 26.9%. Overall, 4.8 million more children were covered by these programs in 2004 than in 2000. This increase more than compensated for the 2.5 million decline of employer coverage among American youth, who experienced a slight decline in the number of uninsured during this period.

Coverage of prime-age working Americans

Medicaid and SCHIP provided little help for Americans between the ages of 25 and 54. Those in the middle income quintile (with annual income of about $45,000-$67,000) experienced declines in employer-provided coverage from 80.6% in 2000 to 75.8%, a drop of 4.8 percentage points (see Table 5). During the same period, people in this age/income grouping increased their Medicaid coverage from 1.3% to 2.0%, an increase of only 0.7 percentage points. Therefore, unlike the phenomenon that occurred for children, the decline in employer-provided health insurance left middle-income adults much more vulnerable (see Figure C). The share of these adults that became uninsured increased 3.5 percentage points, from 13.2% in 2000 to 16.7% in 2004.

Even those adults in the lowest income quintile did not offset their declines in employer-provided coverage with comparable increases in public insurance. The lowest quintile experienced a decline in employer coverage of 9.1 percentage points in the past four years, whereas the increase in Medicaid coverage was only 3.8 percentage points. While this public coverage did enable some to remain covered by some sort of health insurance, many more fell into the ranks of the uninsured.

Coverage by state

While the majority of states experienced significant declines in employer-provided coverage between the 1999-2000 and 2003-04 periods, the level and extent of coverage loss varied by state, as shown in Table 6. The states with the highest employer-provided coverage rates in the merged 2003-04 years were New Hampshire (72.7%), Minnesota (69.5%), and Delaware (68.4%). The lowest coverage rates were found in New Mexico (49.6%), Montana (50.7%), and Arkansas (51.1%). Maryland, Maine, Missouri, North Carolina, and Wisconsin all experienced losses in coverage rates in excess of 6.0 percentage points.

Among the working population, the average loss in employer-provided coverage was 2.7 percentage points between the 1999-2000 and 2003-04 periods. As shown in Table 7, some states fared better than others. Workers in nine states experienced significant declines in coverage during this period. The sharpest rate decline was in Virginia, with a 6.7 percentage-point decline in coverage. The next largest declines were in Indiana, Massachusetts, and New Jersey, all with 5.6 percentage-point declines.

Conclusion

Social insurance is intended to insulate people from negative shocks such as job loss, illness, or natural disaster. Public insurance is intended to provide a safety net to people who have limited access to private insurance markets. Clearly, there are many Americans who fall through the growing crack between employer-provided coverage and government health programs. A universal system, one that provides a minimum standard of care to everyone, would provide Americans with access to the type of health care appropriate for the most prosperous nation in the world. Taking insurance out of the job market and into the public sector has the potential to provide a stronger safety net, particularly during times of weak labor growth. This can lead more Americans to have steadier insurance access and increase their ability to secure regular medical care.

Unfortunately, the day when Americans might see universal health care in the United States seems a distant one. To make matters worse, Congress and President Bush are attempting to weaken both the government safety net and the employer system. A recent congressional budget resolution calls for substantial cuts to Medicaid, and President Bush’s tax reform panel is apparently proposing a cap on the employer income deduction for health insurance benefits, diminishing incentives for providing insurance in the workplace. At the same time, states are facing fiscal difficulties that may cause them to cut publicly provided health benefits even deeper.

From 2000 to 2004, this country saw a substantial rise in the number of uninsured. A continued decline in those with employer-provided health insurance along with a weakening of the health insurance safety net will undoubtedly cause more and more Americans to lose coverage and therefore access to adequate health care.

October 2005

The author thanks Jin Dai for his research assistance on this Briefing Paper.

* “Pay-or-play:” A measure that requires businesses to provide health insurance to its workers, or pay into a government fund that will do it for them. For further discussion, see the N.Y.C. Health Care Security Act web site: http://nychealthcaresecurity.org/news.html

Endnotes

1. Mead, Julia C. 2005. “Suffolk requires big stores to help with health care.” The New York Times, September 28.

2. Rosenbaum, David E. 2005. “Tax panel says popular breaks should be cut.” The New York Times, October 12, page A1.

3. Taylor, Andrew. 2005. “Budget battles to center on long-term cuts.” Washington Post, September 27.

The chronic problem of declining health coverage

Employer-provided health insurance falls for third consecutive year

By Elise Gould

The costs to working families of the recession and jobless recovery have been amply documented in terms of jobs, wages, and incomes (Mishel et al. 2004). Yet the persistently weak labor market in tandem with sharply increasing health costs have led to a related problem for working families: the loss of employer-provided health coverage. This report examines the erosion of employer-based coverage since 2000, with an emphasis on the characteristics—gender, race, education, and wage and income levels—of those who have lost coverage.

Although unemployment has increased and the labor market has shrunk over this period, the loss of jobs cannot explain all of the decline in employer health care coverage. Jobholders also experienced a drop in coverage from 58.9% to 56.4%, a change of 2.5 percentage points. This decline may be the result of a couple of trends: the slack in the labor market that has weakened workers’ bargaining power or steep increases in health care costs that are being passed to employers and employees in the form of higher premiums and lower take-up rates.

But regardless of the causes, an examination of the recent data clearly reveals a widespread loss of coverage. Predictably, those with the least education or income lost ground, but so did those with college degrees and higher incomes. Children were particularly likely to lose employer-based coverage, although many of those from poorer families have been picked up by publicly provided insurance.

In essence, the direction of health care policy is being determined by employers, who are shifting the cost of health coverage for the least-advantaged children to the public sector. While such a shift in the source of coverage for these children may be desirable in that it ensures they have reliable, ongoing care that is less sensitive to fluctuating market forces, it also exposes them to the ups and downs of federal and state fiscal policy.

While the most recent data on employer-provided health coverage goes through 2003, data on employment trends and health costs through 2004 suggest that these negative trends persist in the current job market.

The central findings regarding the loss of employer-provided coverage are:

• The number of uninsured Americans rose by 1.4 million, from 43.6 million in 2002 to 45.0 million in 2003, and over five million people on net became uninsured between 2000 and 2003. This increase was due primarily to the precipitous decline in employer-provided health coverage for workers and their dependents.

• A significant part of this drop in employer health care coverage was due to the loss of jobs over the 2001 recession and jobless recovery. This drop is reflected in 3.8 million fewer Americans with employer-provided health coverage, or a decline from 63.6% to 60.4% of the U.S. population with employer-provided health coverage.

• While many Americans lost coverage because they or a family member lost their job, jobholders also experienced a significant decline in coverage. Between 2000 and 2003, 3.4 million fewer employed workers had health coverage from their own employer.

• Those workers in the bottom 20% of hourly wage earners were the least likely to have employer coverage; 24.9% of the bottom quintile was covered compared to 77.8% for workers in the highest wage quintile. Those in the second lowest wage quintile fared the worst from 2000 to 2003, with a decline in coverage of 4.0 percentage points.

• Children experienced the sharpest decline, with a net 2.4 million fewer children covered by employer-provided health insurance in 2003 than in 2000. The percentage of children under age 18 with employer coverage fell from 65.6% in 2000 to 61.2% in 2003. Fortunately, existing government insurance (i.e., Medicaid and State Children’s Health Insurance Programs) increased coverage to children by 5.5 percentage points, enough to offset the sharp decline in employer coverage for this group.¹

• The decline in employer coverage was pervasive and felt throughout the country. When comparing the 1999-2000 and 2002-03 periods, North Carolina, Arkansas, and Maine experienced the sharpest declines, with drops of 6.4, 6.2, and 5.4 percentage points, respectively.

Coverage for individual workers and their family members

Nearly four million people—including both workers on their own policy and spouses or children on a family plan—lost employer-provided health coverage from 2000 to 2003. Between 2002 and 2003, 1.3 million people lost coverage.

As shown in Table 1, whites are more likely to be insured, and they experienced less of a decline in coverage than blacks. In 2003, those with a college degree were 34% more likely to have employer-provided coverage than those with only a high school degree. In addition, those with only a high school degree experienced a greater decline in coverage compared to those with a college degree (declines of 4.3 vs. 3.0 percentage points).

Only 20% of the American families with earnings in the lowest 20% of the income spectrum have employer coverage, compared to 84% for those families with incomes in the top 20%. These lowest-earning families also suffered the greatest declines in coverage. Those families in the bottom and second quintile (20-40%) of the wage scale experienced a loss of 4.0 and 5.6 percentage points, respectively, while those in both the fourth (60-80%) and top quintiles only declined 2.8 and 1.6 percentage points, respectively.

Coverage for individual workers

The percent of individual workers with employer-provided health insurance coverage fell from 2002 to 2003, continuing the decline that began in 2000. As shown in Table 2, 56.4% of workers who worked at least 20 hours per week and 26 weeks per year received employer-provided health insurance from their own employer, down from 57.3% the year before and down a total of 2.5 percentage points since 2000. This decline left about 3.4 million fewer workers with employer-provided coverage.

The loss of coverage was greater for men than women, as working men with employer coverage fell 3.4 percentage points compared to 1.3 points for women workers. Working men, however, still had higher coverage than women in 2003 (59.7% vs. 52.3%).

Only 52.9% of workers with a high school education were covered in 2003, whereas 68.8% of college-educated workers had employer-provided health coverage. This disparity reflects the fact that higher-skilled workers are likely to have higher-quality jobs that offer health benefits. That said, even college graduates have not been insulated from the decline in employer-provided health insurance. However, workers with only a high school education fared worse than those with a college degree (a decline of 3.3 vs. 2.4 percentage points).

Workers earning lower hourly wages are significantly less likely to have employer-provided health coverage than those earning higher wages. In 2003, workers in the highest wage quintile were more than three times as likely to have employer-provided health insurance as those workers in the lowest quintile (77.8% vs. 24.9%). The decline in employer-provided health insurance from 2000 to 2003 pervaded all wage quintiles; however, the number of insured workers with wages in the second quintile (20-40%) fell the most (a drop of 4.0 percentage points).

Coverage for children

Employer-provided coverage f
ell further for children than for any other age group (see Table 3). While overall employer coverage fell from 63.6% to 60.4%, the decline in employer coverage for children fell from 65.6% to 61.2%.

Ranking children by their family’s income is particularly revealing of the unequal distribution of employer-provided health care (Figure 1). Only 18.6% of children in the lowest income quintile were found to have employer-provided health insurance compared with 87.0% of the children in the highest income quintile. In other words, children whose family incomes were in the top 20% were more than four-and-a-half times more likely to have employer-provided health insurance than children in the lowest 20%. At the same time, the drop in coverage for those in the lowest income quintile was over three times that for children in the highest income quintile. The group hurt the worst, however, was children in the second lowest quintile; their coverage rates declined by 8.6 percentage points from 54.3% to 45.7%. Unlike the children in the lowest quintile, these children are less likely to be eligible for government health insurance programs, and thus their lack of employer coverage makes them more likely to be uninsured.

In many ways, children fared the worst of any group in terms of employer-provided health coverage, but the strength of government programs aimed at children kept many from falling into the ranks of the uninsured. As shown in Figure 2, growth in enrollment in both Medicaid and the State Children’s Health Insurance Program (SCHIP) increased the percent of children covered from 20.9% to 26.4%. Overall, 4.3 million more children were covered by these programs in 2003 than in 2000. This increase more than compensated for the 2.4 million decline of employer coverage among American youth, who experienced a slight decline in the number of uninsured during this period.

Coverage by state

While nearly all states experienced a decline in employer-provided coverage in the 1999-2000 and 2002-03 periods, the level and extent of coverage loss varied by state, as shown in Table 4. The states with the highest employer-provided coverage rates between 2002and 2003 were New Hampshire (72.9%), Minnesota (70.6%), and Delaware (70.1%). The lowest coverage rates were found in Montana (49.9%), New Mexico (50.0%), and Arkansas (50.4%). Delaware, Georgia, New Hampshire, New York, and North Dakota were the only states to experience increases in employer-provided coverage. At the same time, Arkansas, Maine, and North Carolina all experienced losses in excess of 5.0 percentage points.

Among the working population, the average loss in employer-provided coverage was 2.2% between combined years 1999/2000 and 2002/2003. As shown in Table 5, some states fared better than others. Workers in Maryland, Missouri, New Jersey, New Mexico, Oregon, Texas, Virginia, and Wyoming experienced declines of greater than 4.5 percentage points. This was particularly bad for workers in New Mexico, Texas, and Wyoming, who already had lower-than-average coverage rates.

Conclusion

Over 3.8 million fewer Americans had employer-provided health insurance in 2003 than in 2000. Employer-provided health coverage fell for both primary policy holders and their dependents. The percentage of workers who received employer-provided coverage from their own job fell 2.5 percentage points. At the same time, over 2.4 million fewer children had employment-based health insurance in 2003 than in 2000. Medicaid expansions in the 1990s and the creation of SCHIP in 1997 significantly aided children who lost employer-provided coverage. Despite the lack of any significant legislative expansion of eligibility since 2000, many more children were covered by government insurance because they no longer qualified for or could afford employer-provided health coverage.

Across the board, Americans in the second-lowest wage quintile experienced the greatest declines in employer coverage. People in the second quintile of family income had a 5.6 percentage point decline in coverage. Workers in the second-lowest wage quintile saw employer-provided insurance rates drop 4.0 percentage points, and children in the second-lowest family income quintile experienced a decline in coverage of 8.6 percentage points. While significant declines in coverage occurred for people in the lowest wage quintile, those in the second-lowest wage quintile have fewer government health insurance programs to fall back on and thus more likely to fall into the ranks of the uninsured when they lose employer coverage.

Data released last week from the Kaiser Family Foundation (2004) suggest the downward trend in employer coverage will continue into 2004. The Foundation found an increase in premiums of 11.2% between 2003 and 2004, the fourth straight year of double-digit increases. Given these increases, small employers in particular are less likely to offer health benefits. In addition, because premiums continued to rise over four times faster than wage gains, families are less able to afford the premiums associated with employer coverage. All of these data point toward a further drop in the number of Americans with employer-provided health coverage in the coming year.

Endnote

1. Eligibility rules did not change significantly over this period, but rather the demand for public insurance increased as children were no longer being covered by their parents’ plan, either due to job loss or the growing inability to afford family plan premiums.

Bibliography

Kaiser Family Foundation and The Health Research and Educational Trust. 2004. Employer Health Benefits 2004: Annual Survey. Menlo Park, Calif.: Kaiser Family Foundation.

Mishel, Lawrence, Jared Bernstein, and Sylvia Allegretto. 2004. The State of Working America 2004/2005. An Economic Policy Institute series. Ithica, N.Y.: Cornell University Press.