Section 3: Employee Coverage, Eligibility, and Participation
Employers are the principal source of health insurance in the United States, providing health benefits for over 155 million nonelderly people in America1. In firms that both offer and do not offer health benefits, 59% of workers are covered by health benefits offered by the firm that they work for. Most workers are offered health coverage at work, and the vast majority of workers who are offered coverage take it. Workers may not be covered by their own employer for several reasons: their employer may not offer coverage, they may be ineligible for benefits offered by their firm, they may choose to elect coverage through their spouse’s employer, or they may refuse an offer of coverage from their firm.
Fifty-nine percent of workers in firms both offering and not offering health benefits are covered by health benefits offered by their own employer (Exhibit 3.1). Looking at workers in firms that offer health benefits, 65% percent are covered by health benefits offered by their own employer (Exhibit 3.2). Since 2000, the percentage of workers covered by their employer’s health plan has fallen three percentage points (Exhibit 3.5). The rate of coverage varies by certain characteristics of the firm, such as firm size, industry, and the percentage of part-time and low-wage employees.
Among firms offering health benefits, firms with 3 to 24 workers and firms with 1,000 to 4,999 workers cover a significantly higher percentage of their employees (69% and 68% respectively) than firms of other sizes. The average coverage rate in firms with 5,000 or more workers (60%) is significantly lower than the coverage rate in firms of other sizes (Exhibit 3.2).
There also is significant variation in the coverage rate across industry groups. Retail firms that offer health benefits on average cover 43% of their workers, compared with 85% of state and local government workers, and 76% of those working in the manufacturing industry (Exhibit 3.2).
Among firms offering health benefits, higher wage firms—where fewer than 35% of workers earn $20,000 or less annually—have higher coverage rates than lower wage firms—where 35% or more of workers earn $20,000 or less annually. Sixty-seven percent of workers in higher wage firms are covered by their own employer, compared to 47% of workers in lower wage firms.
Even in firms that offer coverage, not all employees are eligible for their firm’s health benefits. Additionally, not all eligible employees with an offer of health coverage take the offer of coverage. The number of workers covered is a product of both the percentage of workers who are actually eligible for the firm’s health insurance and the percentage who choose to “take-up” (i.e., elect to participate in) the benefit.
Seventy-eight percent of workers in firms offering health benefits are eligible for the coverage offered by their employer in 2006, statistically unchanged from the 80% reported in 2005 (Exhibit 3.3). The average rates of eligibility are significantly higher in firms with 3 to 24 workers (88%) and firms with 1,000 to 4,999 workers (81%) than the eligibility rates in firms of other sizes. The average eligibility rate among workers in firms with 5,000 or more workers (73%) is significantly lower than the eligibility rate in firms of other sizes (Exhibit 3.2).
Employees who are offered coverage through their employer generally elect to take the offer. Eighty-two percent of eligible workers take-up coverage when it is offered to them, a similar percentage to last year (83%) (Exhibit 3.4).
The likelihood of a worker accepting a firm’s offer of coverage varies by firm wage level. Eligible employees in higher wage firms—where fewer than 35% of workers earn $20,000 or less annually—are more likely to take-up coverage (83%) than eligible employees in lower wage firms (71%) – where 35% or more of workers earn $20,000 or less annually.
Seventy-three percent of covered workers face a waiting period before coverage is available. The average waiting period among covered workers who face a waiting period is 2.2 months (Exhibit 3.6).
Exhibit 3.1: Percentage of All Workers Covered by Their Employers’ Health Benefits, in Firms Both Offering and Not Offering Health Benefits, by Firm Size, 1999-2006*
1999
2000
2001
2002
2003
2004
2005
2006
3-24 Workers
50%
50%
49%
45%
44%
43%
41%
45%
25-49 Workers
56
63
62
57
59
56
55
55
50-199 Workers
61
62
67
64
61
56
59
62
200-999 Workers
69
69
71
69
68
69
65
66
1,000-4,999 Workers
68
68
69
70
69
68
69
68
5,000 Workers
64
66
69
68
68
67
66
60
All Small Firms (3-199 Workers)
55%
57%
58%
54%
53%
50%
50%
53%
All Large Firms (200 or More Workers)
66%
67%
69%
69%
68%
68%
66%
63%
ALL FIRMS
62%
63%
65%
63%
62%
61%
60%
59%
*
Tests found no statistical difference from estimate for the previous year shown at p<.05.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2006.
For more information regarding survey methodology, click here to view the Survey Design and Methods section.
Exhibit 3.2: Eligibility, Take-Up Rate, and Coverage in Firms Offering Health Benefits, by Firm Size, Region, and Industry, 2006
Percentage of Workers Eligible For Health Benefits Offered By Their Employer
Percentage of Eligible Workers Who Participate in Their Employers’ Plan (Take-Up Rate)
Percentage of Workers Covered by Their Employers’ Health Benefits
FIRM SIZE
3-24 Workers
88%*
79%
69%*
25-49 Workers
79
79
63
50-199 Workers
80
84
67
200-999 Workers
78
84*
67
1,000-4,999 Workers
81*
83
68*
5,000 or More Workers
73*
80
60*
ALL SMALL FIRMS (3-199 Workers)
83%*
81%
67%
ALL LARGE FIRMS (200 or More Workers)
76%*
82%
63%
REGION
Northeast
80%
83%
67%
Midwest
77
83
64
South
77
79*
63
West
79
83
66
INDUSTRY
Agriculture/Mining/Construction
73%
82%
58%
Manufacturing
87*
86*
76*
Transportation/Communications/Utilities
84
89*
76*
Wholesale
76
80
62
Retail
59*
75*
43*
Finance
86*
84
73*
Service
76
78*
61*
State/Local Government
92*
92*
85*
Health Care
79
83
66
ALL FIRMS
78%
82%
65%
*
Estimate for eligibility, take-up rate, or coverage is statistically different from all other firms not in the indicated size, region, or industry category at p<.05.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006.
For more information regarding survey methodology, click here to view the Survey Design and Methods section.
Exhibit 3.3: Percentage of Workers Eligible For Health Benefits Offered By Their Employer, by Firm Size, 1999-2006
For more information regarding survey methodology, click here to view the Survey Design and Methods section.
