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Health Tracking

TRENDS

Trends In Health Insurance Coverage: A Look At Early 2001 Data

Using nationally representative data from early 2001, this paper examines the state of employment-based health benefits among workers and how it has changed since 1993. Data from 2001 may shed light on whether the weakening economy has started to affect U.S. health insurance coverage.

Data And Methods

 
Data for this study come from a series of supplements to the Current Population Survey (CPS). In 1995 the Census Bureau added a supplement to the February CPS to gather information about contingent and alternative work arrangements. As part of the supplement, workers were asked a series of questions about health benefits in the workplace. From these questions, users of the survey can determine whether workers are offered coverage, if they take coverage, why they are not eligible for coverage, why they turn down coverage, other sources of coverage they may have, and whether they are uninsured. The survey was repeated in February 1997, 1999, and 2001. The data collected in the survey also were collected in supplements to the CPS in May 1988 and April 1993. As a result, a time series can be constructed that includes numerous years between 1988 and 2001 on workers’ experiences with health benefits.

The CPS data used in this paper reflect key turning points in health insurance coverage in the late 1980s and mid-1990s as reflected by costs and coverage trends before and after these periods. During the late 1980s health insurance cost increases often exceeded 10 percent, while the percentage of insured Americans was falling.⁴ However, in the mid-1990s health insurance costs were stagnant, the economy started to strengthen, and unemployment began to fall. In 1992 the unemployment rate was 7.5 percent; by 2000 it was 4 percent.⁵ At the same time, more employers offered health benefits. Although health insurance costs started to rise again during the late 1990s, employers have yet to increase employees’ share of the premium.⁶

To examine recent trends, I used the CPS supplements to create a timeline containing comparable data on health benefits for workers ages 18–64.⁷ I did not include self-employed persons in the analysis because they were not asked questions about employer sponsorship of health benefits.

Study Findings

Top Data And Methods Study Findings Discussion And Policy... Notes

 
Data from the CPS show that the percentage of workers offered health benefits (the offer rate) has been rising since 1993 (Exhibit 1). Following the same trend, the percentage of workers with health benefits through their own employer has also increased since 1993, after a decline between 1988 and 1993. Despite the fact that an increasing percentage of workers are being offered health benefits by their own employer, and a slightly increasing percentage were covered by their own employer’s health plan, fewer workers are taking health benefits when they are offered. Between 1988 and 1993 the percentage of workers accepting health benefits (the take-up rate) fell four percentage points, and it continued to decline in 2001.

View larger version (17K): [in this window] [in a new window]   EXHIBIT 1 Health Insurance Offer, Coverage, And Take-Up Rates Among Wage And Salary Workers, Selected Years 1988–2001

View larger version (15K): [in this window] [in a new window]   EXHIBIT 2 Sources Of Health Insurance For Wage And Salary Workers, Selected Years 1988–2001

Hours of work. Exhibit 3 shows wide variation in offer rates by hours of work between 1997 and 2001. Offer rates rose for persons working at least twenty-one hours per week. The offer rate for those employed twenty-one to thirty-four hours per week remained virtually constant between 1997 and 1999 but then rose to 50.4 percent in 2001. The percentage of full-time workers who were offered coverage rose as well. Coverage rates were generally stable for all workers during this time period, but take-up rates declined.

Race. Workers of all races experienced some increase in offer rates since 1997 (Exhibit 4). For Hispanic workers, the increase in participation rates occurred only between 1997 and 1999. For whites, blacks, and workers of other races, participation rates continued to increase through 2001.

Top Data And Methods Study Findings Discussion And Policy... Notes

The expansion in employer coverage occurred during an interesting time. Since the late 1990s the cost of providing health benefits to workers has been rising. Economists and others would expect fewer workers to be covered by health benefits, but those expectations have yet to materialize. It appears that as long as the economy is strong, employers do not cut back on benefits. Now that the economy has slowed, the prediction that employers will cut back on health benefits may come true, but the difficulty in making this prediction is a function of timing as much as one of economics.

Why didn’t the percentage of workers with employer coverage shrink in early 2001? Generally speaking, employers made decisions about the health benefits they were going to offer in 2001, and how workers would pay for those health benefits, in mid-2000. When open enrollment for 2001 began in the fall of 2000, many economists were predicting a recession, but the economy was not quite in that state. In fact, the unemployment rate during the fall of 2000 reached 3.9 percent. Employers were unlikely to cut benefits, regardless of cost increases, when tight labor markets were leaving them concerned about recruitment and retention.

Now that the economy clearly is not as strong as it was in 2000, will employers cut back on health benefits? It depends. As of this writing, employers were planning for changes that they were to announce in the fall of 2001 for benefits in 2002. They may have planned to cut back on benefits because of the slow economy, but employers have to ask whether the economy will be slow in 2002. After numerous interest rate cuts by the Federal Reserve Board and a tax cut, many economists and others expect that the economy will turn around during 2002, although the uncertainty prevailing after September 11’s terrorist acts could change the picture as well. If employers expect the economy to turn around then, they may find it easier to deal with the slowing economy by cutting jobs than by cutting benefits, especially given the need to reinstate benefits once it is clear that the economy has turned around. However, because of lags in the collection of data, we may not know for sure that the economy turned around in 2002 until the end of that year.

The relative strength of the economy and the demand for workers are likely to play as strong a role as changes in the cost of health benefits in determining the percentage of workers with health benefits. Even if a patients’ bill of rights, new technology, and other factors continue to raise the cost of health benefits, we may continue to see more workers with these benefits once the economy strengthens. The real question is whether an even greater expansion in health benefits would have occurred if the cost of providing them were not rising much faster than inflation.

Editor's Notes

 
Paul Fronstin is a senior research associate with the Employee Benefit Research Institute (EBRI) in Washington, D.C. He is also director of the institute’s Health Security and Quality Research Program. He has been with EBRI since 1993.

Any views expressed in this paper are those of the author and should not be ascribed to the officers, trustees, members, or other sponsors of EBRI, EBRI-ERF, or their staffs. The author thanks Dallas Salisbury, Karl Polzer, Rachel Christensen, Ray Werntz, and two anonymous reviewers for commenting on an earlier version of this paper.

Notes

Top Data And Methods Study Findings Discussion And Policy... Notes

 

1. P. Fronstin, Employment-Based Health Benefits: Trends and Outlook, EBRI Issue Brief no. 233 (Washington: Employee Benefit Research Institute, May 2001).
2. Ibid.
3. J. Gabel et al., "Job-Based Health Insurance in 2000: Premiums Rise Sharply while Coverage Grows," Health Affairs (Sep/Oct 2000): 144–151.
4. Fronstin, Employment-Based Health Benefits.
5. See U.S. Bureau of Labor Statistics,<ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt> (16 November 2001).
6. According to J. Gabel et al., "Job-Based Health Insurance in 2001: Inflation Hits Double Digits, Managed Care Returns," Health Affairs (Sep/Oct 2001): 180–186, employees contribute an average of 15 percent of the cost of employee-only coverage and 27 percent of the cost of family coverage, and employees have not experienced a statistically significant increase in their contributions over the period studied.
7. The sample sizes are as follows: May 1988: N = 22,789; April 1993: N = 22,137; February 1995: N = 48,590; February 1997: N = 43,688; February 1999: N = 44,305; and February 2001: N = 33,084.
8. Numerous other variables also may affect trends in the percentage of workers with health benefits. For example, as the population ages, the percentage of workers with health benefits will increase because older Americans are generally more risk-averse than younger Americans are. For more information about other factors affecting trends in coverage rates, see G. Acs, "Explaining Trends in Health Insurance Coverage between 1988 and 1991," Inquiry (Spring 1995): 102–110; P. Fronstin and S.C. Snider, "An Examination of the Decline in Employment-Based Health Insurance between 1988 and 1993,"Inquiry (Winter 1996/97): 317–325; P. Fronstin, L.G. Goldberg, and P.K. Robins, "An Analysis of the Decline in Private Health Insurance Coverage between 1988 and 1992," Social Science Quarterly (March 1997): 44–65; R. Kronick and T. Gilmer, "Explaining the Decline in Health Insurance Coverage, 1979–1995," Health Affairs (Mar/Apr 1999): 30–47; and S.H. Long and J. Rodgers, "Do Shifts towards Service Industries, Part-Time Work, and Self-Employment Explain the Rising Uninsured Rate?" Inquiry (Spring 1995): 111–116.

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