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Snapshots: Trends in Employer-Sponsored Health Insurance Offer Rates for Workers in Private Businesses

Most Americans receive their health insurance through their own job or the job of a family member; an offer of coverage at work is an important determinant of the likelihood of having private health insurance. This analysis examines the percentage of nonelderly, full-time adult workers (age 18 through 64) in private firms who were offered health insurance at their current primary job and how that changed over the period from 1995 to 2005.

The condition of the national economy often has an effect on the offer rate among workers. From 1995 to 2005, gross domestic product expanded at a rate of 2.6% in 1995 and accelerated to 4.1% in 2000, but growth slowed markedly to 1.1% in 2001 and stood at 3.1% in 2005. As one might expect, the percentage of workers offered coverage at work rose similarly in the late 1990s and fell after 2000. The current economic slowdown has been particularly deep, with GDP flat in 2008 and shrinking 2.6% in 2009. Consequently, there is concern that the poor economic conditions of recent years have led not only to a loss of jobs but also to fewer workers being offered coverage at work and a reduction of employment-based coverage.

To assess the impact of the economic booms and busts on employer-sponsored coverage, we analyzed workers in private (non-government) businesses using data from the 1995, 2001 and 2005 February Contingent Worker Supplement of the Current Population Survey (CPS).1 Workers were considered full-time if they reported that they usually worked 35 or more hours per week at a primary job.  Our analysis focused only on a worker’s main job; second workplaces were not examined.

Rates of Offers of Employer-Sponsored Insurance

Just over 80% of adult full-time workers in private businesses were offered health insurance at a primary job in February of 2005 (Figure 1).  The percentage of these workers offered coverage rose from 80.8% in 1995 to 84.1% in 2001, before falling back to 80.4% in 2005.

Figure 1: Percent of Workers Offered Employer-Sponsored Insurance, 1995, 2001, and 2005

Figure 1: Percent of Workers Offered Employer-Sponsored Insurance, 1995, 2001, and 2005

* Statistically significantly different from the previous available data year at the 0.05 levelSource: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics.

An additional 3% of adult full-time workers in 2005 worked for an employer that offered health insurance to some workers but not to them, a reduction from 4.6% of such workers in 1995 (Figure 2).When asked why they were not offered coverage, 55.9% of this group in 2005 reported that they had not worked for their employer long enough to be covered.  This was the leading reason among these workers for not being offered coverage in each of the three years.  Almost 15.8% of these workers in 2005 said that they were not offered coverage because they did not work enough hours per week or enough weeks per year, a somewhat surprising finding because the analysis is limited to adult workers who report that they usually work at least 35 hours per week. In addition, this share nearly doubled between 1995 and 2005 (Figure 3.)

Figure 2:  Percent of Workers Not Offered Employer-Sponsored Insurance (ESI) while ESI Offered to Others, 1995, 2001, and 2005

* Statistically significantly different from the previous available data year at the 0.05 level ^ Statistically significantly different from the 1995 data year at the 0.05 level Source: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics.

* Statistically significantly different from the previous available data year at the 0.05 level
^ Statistically significantly different from the 1995 data year at the 0.05 level
Source: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics.

Figure 3: Worker Reasons for Not Receiving an Offer of Health Insurance

1995 2001 2005
Don’t work enough hours per week or weeks per year 8.6% 13.5% * 15.8% ^
Contract or temporary employees not allowed in plan 7.9% 7.5% 10.1% *
Haven’t worked for this employer long enough to be covered 62.4% 62.2% 55.9% * ^
Have a pre-existing condition 1.7% 1.2% 1.0%
Other 19.4% 15.7% * 17.2%
* Statistically significantly different from the previous available data year at the 0.05 level
^ Statistically significantly different from the 1995 data year at the 0.05 levelSource: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics.

Offer Rate Differences Across Worker Earnings

The percentage of adult full-time workers in private businesses offered health insurance varied significantly with wage level.  To produce comparable wage levels over the time period, full-time adult workers were divided into four equal groups (quartiles) based on their reported average weekly wages from a primary job.  The results show that offer rates are significantly correlated with wage levels throughout the wage distribution (Figure 4).  Looking at 2005, for example, 53.4% of workers in the lowest wage quartile were offered health insurance, compared with 76.9% of workers in the second-lowest wage quartile, 86.5% of workers in the second highest wage quartile, and 92.3% of workers in the highest wage quartile. The percentage differences are statistically significant between each wage level for each of the three years.  Workers in the lowest wage quartile were also more likely to have a primary job where health insurance was available to other workers but not to them; this pattern also held over each of the three years.

Figure 4: Percent of Workers Offered Employer-Sponsored Insurance, by Worker Earnings, Compared Across Earnings Quartiles
1995 2001 2005
Offered to Worker Overall 80.8% 84.1% 80.4%
Lowest 25th 52.9% * 62.3% * 53.4% *
25th – 50th 76.3% * 81.1% * 76.9% *
50th – 75th 86.9% * 89.5% * 86.5% *
Highest 25th 92.2% 94.0% 92.3%
Offered to others / not them Overall 4.6% 3.3% 3.3%
Lowest 25th 10.4% * 7.3% * 7.2% *
25th – 50th 5.6% * 4.4% * 3.6% *
50th – 75th 3.6% * 2.5% * 2.7% *
Highest 25th 1.9% 1.1% 1.6%
* Statistically significantly different from the next highest earnings quartile at the 0.05 levelSource: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics

Offer Rate Fluctuations by Worker Earnings

Offer rates increased significantly between 1995 and 2001, and then fell significantly between 2001 and 2005. This trend occurred within each wage quartile, although the percentage swings up and down were relatively larger in the lower wage quartiles (Figure 5). The climb and subsequent fall of the offer rate reached almost a ten percent differential for the lowest quartile, while the highest quartile of earners peaked and fell less than 2% from their initial rate.  These findings suggest that the improving economy in the late 1990s and the economic slowdown after 2000 affected offer rates for workers at all wage levels, but that health insurance offers to lower wage workers may be more sensitive to economic changes.

Further, workers in lower earnings quartiles had lower offer rates during the height of the economy in 2001 than workers in higher earnings quartiles had during the lower-offer periods of 1995 and 2005.  For example, although the second quartile reached an offer rate of 89.5% in 2001, this share was still below the lowest observed offer rate (92.2%) of the top quartile.  This comparison highlights the significant difference in offer rates among workers at different income levels, and indicates that income is more strongly associated with offer rates than the strength of the economy.

Figure 5: Percent of Workers Offered Employer-Sponsored Insurance, by Worker Earnings, Compared Across Years
1995 2001 2005
Offered to me Overall 80.8% 84.1 * 80.4 *
Lowest 25th 52.9% 62.3% * 53.4% *
25th – 50th 76.3% 81.1% * 76.9% *
50th – 75th 86.9% 89.5% * 86.5% *
Highest 25th 92.2% 94.0% * 92.3% *
* Statistically significantly different from the previous available data year at the 0.05 level
^ Statistically significantly different from the 1995 data year at the 0.05 levelSource: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics. 

Offer Rates by Hours Worked Per Week

The percentage of workers offered health insurance at a primary job also varied with the average number of hours that they worked at that job.  Since this analysis is limited to workers who report that they usually work at least 35 hours per week, these differences occurred among workers who typically would be considered as full-time.  In general, workers averaging less than 40 hours per week and workers whose hours varied were much less likely to be offered health insurance at their main job than workers who reported a higher average number of hours worked (Figure 6).  Even people who reported working 40 hours per week, which was the largest group of workers, were less likely to be offered health insurance than people who reported working more than 40 hours per week.  These patterns held over all three years.  In addition, people working less than 40 hours per week and people whose hours varied were more likely in each of the three years to work at a main job where health insurance was offered to others but not to them.  It is evident from these findings that full-time jobs demanding a relatively high commitment of hours were more likely to provide health insurance than jobs requiring only 35 to 40 hours of work. The share of workers in positions that required 35-39 hours was greatest (15.8%) in the leisure and hospitality sector, while those requiring 50 or more hours a week were most prevalent (30.9%) in the mining industry in 2005.

Figure 6: Percent of Workers Offered Employer-Sponsored Insurance, by Hours Worked Per Week 
1995 2001 2005
Offered to Worker Overall 80.8% 84.1% 80.4%
Varies 67.5% * ^ † 71.5% * ^ † 67.3% * ^ †
35-39 67.7% * ^ † 70.0% * ^ † 68.9% * ^ †
40 81.1% ^ † 84.3% ^ † 80.5% ^ †
41-49 86.0% 90.2% † 86.8%
50+ 85.5% 88.7% 86.0%
* Statistically significantly different from 40 Hours Worked per Week at the 0.05 level
^ Statistically significantly different from 41-49 Hours Worked per Week at the 0.05 level
† Statistically significantly different from 50+ Hours Worked per Week at the 0.05 levelSource: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics.

Offer Rates by Industry

The percentage of workers offered health insurance at a primary job also varied significantly by industry in all three years (Figure 7). In 2005, for example, the percentage ranged from around 46% for workers employed with agriculture, forestry, fishing, and hunting to almost 92% for workers engaged in manufacturing or mining. A statistically larger share also reported having full time positions with variable hours in agriculture, forestry, fishing, and hunting (18.6%) than in manufacturing (5.1%), but not mining (14.1%). Trends in offer rates also varied within industries over time, with some industries showing significant volatility over the period (e.g., construction; leisure and hospitality) while others showed a fairly consistent level of offering (e.g., financial services; transportation and utilities). And while the overall offer rate fell slightly between 1995 and 2005, seven industries (construction; education and health services; information; manufacturing; other services; professional and business services; and wholesale and resale trade) saw a statistical increase in offering over the period.

 Figure 7: Percent of Workers Offered Employer-Sponsored Insurance, by Industry
1995 2001 2005
Offered to Worker Overall 80.8% 84.1% * 80.4% *
Agriculture, forestry, fishing, and hunting 49.4% 55.9% 45.8% *
Construction 56.4% 64.9% * 60.4% * ^
Educational and health services 85.3% 90.1% * 89.1% ^
Financial activities 87.3% 87.7% 88.9%
Information 87.4% 90.2% * 90.8% ^
Leisure and hospitality 57.5% 61.3% * 56.6% *
Manufacturing 90.0% 93.1% * 91.6% * ^
Mining 91.5% 93.7% 91.6%
Other services 64.4% 66.2% 70.0% * ^
Professional and business services 78.8% 85.2% * 82.6% * ^
Transportation and utilities 86.1% 85.2% * ^ 84.7% * ^
Wholesale and retail trade 84.4% 84.2% * 83.0% ^
* Statistically significantly different from the previous available data year at the 0.05 level
^ Statistically significantly different from the 1995 data year at the 0.05 levelSource: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics.

Offer Rates by Industry and Wage

This last portion of this analysis focuses on the interaction of industry and wage levels on the percentage of workers offered coverage.  An important question for policy is whether industry differences in offering are simply a reflection of wage differences across industries or whether other factors are involved.  For the analysis, industries were divided into High-ESI and Low-ESI groups; an industry was classified as High-ESI if at least 75 percent of workers were offered health insurance in each of the three years.3   Workers were again divided into quartiles based on weekly earnings.

Workers in High-ESI industries were much more likely to be offered health insurance than workers in Low-ESI industries in each wage quartile and in each year (Figure 8). The differences were consistent and large in all quartiles. In 2005, for example, among the lowest quartile of earners, 66.3% of High-ESI workers received offers compared to only 34.7% of Low-ESI workers, an industry-attributable difference of more than 30%. In fact, in the lowest two wage quartiles, the offer rates for workers in High-ESI industries averaged more than 25 percentage points higher than the offer rates for workers in Low-ESI industries. These large differences indicate that industry, and not wages alone, correlates with a worker’s likelihood of receiving an offer of health insurance.

Figure 8: Percent of Workers Offered Employer-Sponsored Insurance, by Industry and Wage

1995 2001 2005
Offered to Worker Overall 80.8% 84.1% 80.4%
Low ESI Industry 58.5% 63.4% 60.5%
High ESI Industry 85.6% * 88.6% * 87.4% *
Lowest 25th Low ESI 38.3% 45.1% 34.7%
High ESI 60.4% * 69.9% * 66.3% *
25th – 50th Low ESI 56.6% 60.7% 58.5%
High ESI 81.0% * 85.9% * 84.0% *
50th – 75th Low ESI 70.6% 74.4% 71.3%
High ESI 90.0% * 92.5% * 91.3% *
Highest 25th Low ESI 74.8% 80.1% 80.6%
High ESI 94.4% * 95.7% * 94.9% *
* Statistically significantly different from the Low ESI category within the same income quartile and data year at the 0.05 levelSource: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics.

Discussion

About four in five adult full-time workers were offered health insurance at a primary job in 2005.  The offer rate rose between 1995 and 2001 and then fell between 2001 and 2005, largely in sync with changing economic conditions.  The upward and downward changes affected workers at all wage levels, but the shifts were larger for workers in the lower wage quartiles, suggesting that offers to lower-wage workers may be especially sensitive to economic conditions.

The troubled state of the economy has likely resulted in even fewer workers receiving health insurance offers at work, further fraying the employer-based health insurance system that covers most Americans.  Lower wage workers appear to be most at risk, but some workers at all wage levels may be affected.

The health reform law recently passed by Congress and signed into law by President Obama contains many provisions that are also likely to affect trends in employer-sponsored health insurance. These provisions include both mandates and subsidies for employers, and new state-based health insurance exchanges that will facilitate the purchase of insurance for individuals and small businesses. Beginning in 2010, small businesses that offer health insurance will be able to take advantage of tax credits, and in 2014 these employers will be able to participate in small business health insurance exchanges, while larger employers will be required to either offer health insurance or pay a fee for each worker who uses a subsidy to buy coverage through an exchange.

These aspects of the health reform law may spur an increase in offer rates among employers. Yet, many employers will still decline to offer health insurance, and workers in these firms may either purchase insurance through the new exchanges or enroll in Medicaid if they are eligible under the program’s 2014 expansion—also an element of the health reform law. Massachusetts may offer some clues regarding the effects of the implementation of health reform since the state’s 2006 health care reform law served as a model for the federal law. Between 2007 and 2009, Massachusetts saw its employer offer rate increase from 72% to 76%, even as the national offer rate held constant.4 This trend may have resulted in part from the Massachusetts law’s employer “fair share contribution” of up to $295. Most employers are required to pay this fee for each employee for whom they do not contribute to health insurance costs. The federal law contains a similar penalty for larger employers, but it is a much more substantial fine of $2,000 or more. Although this incentive may serve to increase offer rates nationally, the federal law also exempts far more employers from the requirement than the Massachusetts law. While employers with more than 50 workers are required to pay a fee under national reform, all firms with more than 11 employees must make a “fair share contribution” in Massachusetts. In any case, the rate at which premiums rise will also have a considerable influence on employers’ future decisions regarding health insurance benefits. Consequently, Massachusetts is unlikely to be a perfect predictor of the effects of national health reform, and the extent to which health reform will alter the employer offer rate nationally remains to be seen.

This paper was prepared by Gary Claxton, Anthony Damico, and John Connolly of the Kaiser Family Foundation.

Methodology

This analysis uses data from the Current Population Survey (CPS).  The CPS is a monthly household survey of labor force characteristics of the U.S. civilian noninstitutional population. Information on whether employees are offered health insurance at work is from the Contingent Work Supplement, which is a periodic supplement to the CPS February Basic Survey.  The Supplement was last asked in 1995, 2001, and 2005.  In order to analyze health insurance offers by worker wage levels, we merged the Contingent Work Supplements (1995, 2001, 2005) with extracts prepared by the National Bureau of Economic Research from the CPS Annual Earnings File (also called the Merged Outgoing Rotation Group, MORG) files.5 The MORG captures information about wages and earnings for households in CPS panels as they rotate out of the survey.

We restricted the analysis to people (1) between the ages of 18 and 64, (2) who were employed and who report usually working 35 hours per week or more, (3) who are not self-employed and do not work for a government employer, (4) for whom earnings information was available on the MORG.  Temporary and seasonal workers were not excluded from the analysis (unless they failed on the other criteria), because questions about seasonality of employment and temporary employment status were only asked of a subset of the surveyed population.

The merged MORG data matched more than 90% of all records in the Contingent Work Supplement, allowing the use of the standard February final weights.  In the rare cases that duplicate February case numbers existed after the merge, weights of both case numbers were halved to minimize bias.  In all three of the final merged files, more than 95% of records had valid income data; the remaining records were not included in any analyses.  The exclusion of records without earnings data caused only minimal shifts in the principal findings, as seen below (Figure 9).

Figure 9: Percent of Workers Offered Employer-Sponsored Insurance, by Earnings Availability
1995 2001 2005
Records without Earnings Included Offered to Worker 80.2% 83.4% 79.5%
Offered to others 4.7% 3.6% 3.5%
Records without Earnings Excluded Offered to Worker 80.8% 84.1% 80.4%
Offered to others 4.6% 3.3% 3.3%
Source: Kaiser Family Foundation calculations based on data from the Current Population Survey, 1995, 2001, 2005, conducted by the Bureau of Labor Statistics

In calculating the main offer variable, some records were recoded based on responses to the two questions asking why the respondent was not in their employer’s health plan. If a worker indicated that an offer was made but they were not in the plan because ‘contract or temporary employees not allowed in plan’ or because they had ‘not worked long enough for this employer to be covered’, they were recoded as ‘Offered to others’; conversely, workers indicating they were not made an offer because the plan was ‘too expensive’ were recoded as ‘Offered to Worker’, since this analysis examined only offer rates, not costs.

In order to present industry findings using the most recent census codes available, each 1995 and 2001 industry was updated according to the industry crosswalk available at http://www.census.gov/hhes/www/ioindex/indcswk2k.pdf. More information regarding the industry code update can be found at http://www.bls.gov/cps/cpsoccind.htm.

Standard errors were calculated by following the formula presented on page 16-8 (PDF page 326 of 329) of the 2005 Contingent Work Supplement (available at http://www.nber.org/cps/cpsfeb05.pdf). Differences between two standard errors were calculated by summing the squares of each standard error, then taking the square root of that sum.

Notes:

1. U.S. Census Bureau, “Current Population Survey (CPS),” Available online at: http://www.census.gov/cps/.

2. The difference between 2001 and 2005 is not statistically significant.

3. Low-ESI industries include: Agriculture, forestry, fishing, and hunting, Construction, Leisure and hospitality, and Other services.  High-ESI industries include all others.

4. Massachusetts Division of Health Care Finance and Policy,”Massachusetts Employer Survey on Health Insurance (MES) Results 2009,” Available online at:http://www.mass.gov/Eeohhs2/docs/dhcfp/r/pubs/10/mes_fact-sheet_2009.pdf.

5. Available from the National Bureau of Economic Research (NBER): http://www.nber.org/data/morg.html.