Center for Studying Health System Change

Economic Boom Failed to Boost Employer Health Coverage for Working Families

Low-Income Children Gain Coverage Through Public Insurance Expansion

News Releases
Aug. 21, 2002

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ASHINGTON, D.C.—The proportion of Americans in working families covered by employer-sponsored health insurance remained almost flat between 1997 and 2001, with the recent economic boom only suspending a long and steady decline in employer-sponsored health insurance, according to a national tracking study issued today by the Center for Studying Health System Change (HSC).

Growing public health insurance enrollment rather than expansion of employer-based insurance drove the slight decline in the proportion of uninsured Americans in working families, but more than one in 10 people in working families, or 22 million Americans, remained uninsured in 2001, the study found. Uninsured people in working families constitute about two-thirds of the total number of uninsured people in the United States.

"These findings tell us that relying on economic growth alone to reduce the number of uninsured won’t work," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded exclusively by The Robert Wood Johnson Foundation. "Short of a major public investment—either through subsidies to purchase private insurance or public coverage expansions—significantly reducing the number of uninsured Americans in working families isn’t likely."

Of the estimated 189 million nonelderly people in working families in 2001, about 76 percent, or 143 million people, had access to coverage from a current employer and chose to take up the coverage. Another 8 percent, or 16 million people, had access to employer coverage but declined it for a variety of reasons. A third group—30 million people in working families, or 16 percent—did not have access to coverage from a current employer, including about 3 million people who had coverage through a previous employer.

The study’s findings are detailed in a new HSC Tracking Report—Working Families’ Health Insurance Coverage, 1997-2001. Based on results from HSC’s Community Tracking Study Household Survey, a nationally representative survey involving about 60,000 people in 33,000 families, key findings include:

• Among the 16 million people in working families who declined employer coverage, there were striking changes in their insurance status between 1997 and 2001. The proportion enrolled in public programs jumped 13 percentage points, from 34 percent in 1997 to 47 percent in 2001. At the same time, the percentage of uninsured people dropped 7 points, from 52 percent to 45 percent, while the proportion with individual coverage fell 5 points, from 13 percent to 8 percent.
• Among the 30 million people in working families without access to coverage from a current employer, insurance status shifted slightly with the percentage of people covered by public insurance growing to almost 21 percent in 2001, up from 17 percent in 1997. In 2001, 49 percent were uninsured, 19 percent had individual insurance and 11 percent had other private coverage, including retiree and continuation coverage from a previous employer.

People with low incomes—below 200 percent of poverty, or about $35,000 a year for a family of four in 2001—people in fair or poor health and people who work for an employer with fewer than 100 workers are more likely to lack access to and decline employer coverage.

The study also found dramatic improvements in coverage of children in low-income working families. The proportion of uninsured children fell 4.9 percentage points, from 20.4 percent in 1997 to 15.5 percent in 2001. Enrollment of children in public programs rose 10.3 percentage points, from 21 percent in 1997 to 31.3 percent in 2001. At the same time, the percentage of low-income children in working families with employer coverage dropped 4.4 points, from 55.4 percent to 51 percent.

These findings indicate that the State Children’s Health Insurance Program, or SCHIP, played a significant role in reducing the number of uninsured low-income children in working families, but that some substitution of public for private coverage also occurred. When SCHIP was enacted in 1997, Congress required states to put safeguards in place to prevent substitution, or so-called "crowd out," of private coverage for public coverage. About 2 million children in low-income working families gained public coverage between 1997 and 2001, and a third to a half of the increase came from children who otherwise would have had employer coverage.

"Evidence suggests that some of the gains in children’s public coverage were a shift from private to public insurance," said Bradley C. Strunk, an HSC health research analyst who co-authored the study with HSC Senior Researcher James D. Reschovsky, Ph.D.

Helen Darling, president, Washington Business Group on Health, www.wbgh.org
"This study should be a wake-up to all policy makers that health care coverage affordability is a worsening problem. Combined with the current weak economy, cost increases will make it much harder for employees and small employers to have any health benefits. Policy makers have to resist the temptation to mandate ever-richer benefits that will be available to fewer and fewer people."

Ron Pollack, executive director, Families USA, www.familiesusa.org
"The HSC report drives home the harsh reality that millions of hard-working Americans will continue to have no health insurance and no access to health care regardless of economic boom or bust. Our nation must make the uninsured a top priority. As this report points out, the State Children’s Health Insurance Program (SCHIP) has been a tremendous success, contributing directly to the decline in the number of uninsured children. Drawing on the success of SCHIP, any viable solution to addressing the needs of the uninsured must build on both the employer-based system and successful public programs."

Don Young, M.D., president, Health Insurance Association of America, www.hiaa.org
"The employer-based system remains the prime source of health benefits for much of the population and should not be taken for granted, especially at a time of rising health care costs. Tax credits to encourage employers to offer and individuals to obtain private health insurance is one way in which the private and public sectors can work together to close the remaining gaps in health coverage. In this regard, there is definitely a warning flag in this study’s finding that SCHIP has served to convert some children from private insurance to public coverage, rather than purely reducing the ranks of uninsured children."

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded exclusively by The Robert Wood Johnson Foundation and affiliated with Mathematica Policy Research, Inc.