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Changes in Employer-Sponsored Health Insurance: 2001 to 2005

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Document date: January 01, 2007
Released online: February 26, 2008

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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This issue brief focuses on how employer-sponsored insurance (ESI) coverage has changed among employees. It begins with a brief description of major forces driving ESI: changes in the workforce and the rising costs of health insurance over the four year period. Next, it examines the decline in ESI among employees and the underlying reasons determining whether an employee has ESI, specifically: employer sponsorship of ESI, employee eligibility, employee participation, and employee participation in ESI available through another family member's job. The issue brief concludes by examining how the reasons for the decline in ESI varied across different groups of employees.


The majority of Americans under age 65 (“nonelderly”) receive health insurance coverage through their own employer or the employer of a family member. Employer-sponsored insurance coverage (ESI) is therefore central to the nation’s current approach to financing health care for the non-elderly population; however, the long-standing link between work and insurance coverage is weakening. Because employer-sponsored insurance is voluntary on the part of businesses and employees, not all firms offer health benefits, not all workers are eligible for coverage, and not all employees choose to participate or can afford their share of the health premium.

Employer-sponsored insurance (ESI) coverage rates have been falling. While 66 percent of non-elderly Americans had ESI coverage in 2000, only 61 percent had ESI coverage in 2004. Both children and adults experienced steady declines in job-based coverage over this period. However, all of the growth in the number of uninsured was among adults. Were it not for Medicaid and SCHIP, the number and share of children without health insurance would have increased commensurately. Instead, as unemployment spells lowered families’ incomes, public insurance filled in the gap for children up until 2004, but not for adults (Hoffman et al. 2005). By 2005, however, as employer-sponsored insurance continued to erode for both adults and their dependents, the number of uninsured children began to grow again, along with the number of uninsured adults. The large majority of the growth in the uninsured between 2000 and 2005 has been among low-income working families.

This report provides a detailed account of how ESI coverage changed among working-age adults (i.e., nonelderly 19 to 64 year olds) from 2001 to 2005. The paper begins by describing how demographic distributions and characteristics of employment changed between 2001 and 2005 in ways that likely affected employer-sponsored insurance.

Next, the paper focuses on employees, identifying which groups were hardest hit by the decline in job-based coverage. We compare the primary reasons underlying the declines in ESI for different groups of employees by decomposing changes in ESI rates into four components: changes in employer sponsorship of health insurance plans, changes in employees’ eligibility for their employer’s coverage, employees’ participation in coverage offered by their own employer (e.g. take-up), and dependent coverage. We use the most recent national data available that measure these components of ESI coverage.

This research was conducted for the Kaiser Family Foundation and can be downloaded from the KFF web site at http://www.kff.org/uninsured/7599.cfm

(End of excerpt. The entire paper is available in PDF format.)

Topics/Tags: | Employment | Health/Healthcare

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