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Trends in Employment-Based Health Benefits for Workers and Retirees
On June 16, 2008, Paul Fronstin, Employee Benefit Research Institute (EBRI) presented "Trends in Employment-Based Health Benefits for Workers and Retirees" to Senate Finance Committee.
Highlights
- Small employer coverage: Recently, there has been some erosion in the availability of health insurance through smaller employers.
In 2000, 68% of employers with 3-199 employees offered health benefits.
By 2005, only 59 percent offered it.
Between 2005 and 2007, the percentage of these employers offering health benefits was stable.
Employers with 3–9 workers experienced the largest decline in offer rates, with the percentage offering coverage falling nearly steadily from 58% in 2001 to 45% in 2007.
- Total coverage rates: The percentage of workers reporting that they have access to health benefits through their job is largely unchanged from the mid-1990s and down only slightly from the late-1980s.
In 2005, 74% of workers who were not self-employed reported that they were eligible for health benefits through their own job, up slightly from 73.6% in 1995, but down from 77.8% in 1988.
- Employment-based coverage: The percentage of workers with coverage either from their own employer or from someone else’s employer has been remarkably stable.
Between 1994 and 2000, the percentage of workers with health benefits through an employer held steady at between 73% and 75%.
Since 2000, the percentage of workers with health benefits has fallen to about 71%.
- Worker health costs going up: Workers are paying more for health benefits today than they were in 2000.
Average premiums for employee-only coverage increased from $28 to $58 per month between 2000 and 2007, a 107% increase, and
Average family coverage premiums increased from $138 to $273 per month, a 98% increase.
In contrast, the consumer price index (CPI) increased by 20% between 2000 and 2007.
- Cost-sharing going up but out-of-pocket share still low: Worker cost-sharing for health care services has been increasing and has been outpacing overall inflation. Deductibles are increasing and co-payments are increasing. Despite the fact that more workers are subject to higher deductible and co-payments, the percentage of consumer health care expenses paid out-of-pocket is at an all-time low.
In the mid-1990s, more than 30% of consumer health care expenses were paid out-of-pocket.
By 2005, out-of-pocket spending as a percentage of total consumer spending was down to 26%.
- Premium share relatively stable: The percentage of the premium paid by employees for employee-only coverage is down from the mid-1990s and essentially unchanged for family coverage.
In 1993, workers paid an average of 20% of the premium for employee-only coverage.
By 2007, workers were paying 16%.
The percentage that workers pay for family coverage has been
bouncing around between 26% and 28% since 1996.
- Employer cost-control efforts: Employers have also been changing the structure of health benefits in order to control the cost of providing health benefits.
In 2007, 10% of employers offering health benefits were offering a high-deductible health plan with either a health reimbursement arrangement or a health savings account. An estimated 7.5 million adults ages 21–64 with private health insurance were either in an account-based plan or were in a high-deductible health plan that was eligible for an HSA, but had not opened the account.
Some employers are investing resources in an attempt to bring more transparency to the health care system so that workers and their families can make informed health care decisions.
- Retiree health benefits: With respect to health benefits for retirees, research has consistently found that fewer employers are offering retiree health benefits than in the past, and that when retiree health benefits are offered, retirees are experiencing various combinations of rising premiums, higher out-of-pocket expenses, and more stringent eligibility requirements. Most workers will never be eligible for health insurance in retirement through a former employer.
Employment-based Health Benefits Dominates
Employment-based health benefits are by far the most common source of health coverage in the United States. In 2006, 161.7 million individuals under age 65 had some form of employment-based health coverage, representing 62.2% of that population (Fronstin, 2007).
The number and percentage of persons under age 65 with employment-based health benefits has fallen from 167.5 million in 2000, representing 68.4% of the under age 65 population. Fewer people have this coverage for a number of reasons.
Public sources of health insurance picked up some of the decline in employment-based health coverage, while the uninsured as a percentage of the under age 65 population increased from 15.6% in 2000 to 17.9% in 2006.
Are employment-based health benefits eroding?
This question is driven by the rising cost of providing health benefits to workers. Between 2000 and 2007, the cost of providing health benefits doubled, while worker wages and overall inflation increased only 25 and 21%, respectively. While the growth rate in the cost of providing health benefits fell between 2003 and 2007 from 13.9% to 6.1%, growth in the cost of providing health benefits to workers continues to run 50% higher than growth in worker earnings and is double the rate of overall inflation.
While there has been an erosion of availability of health benefits at the small employer level since 2000, the percentage of workers reporting that they have access to health benefits through their job is largely unchanged from the mid-1990s and down only slightly from the late-1980s. In 2005, 74% of workers who were not self-employed reported that they were eligible for health benefits through their own job, up slightly from 73.6% in 1995, but down from 77.8% in 1988.
See EBRI's complete report at here.
About EBRI
The Employee Benefit Research Institute (EBRI) is a nonprofit, nonpartisan research institute that
focuses on health, retirement, and economic security issues. EBRI does not take policy positions
and does not lobby. Visit www.ebri.org
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