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Employee Costs and the Decline in Health Insurance Coverage: Working Paper Series 9036

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Publication Date: July 2002

Publisher(s): National Bureau of Economic Research; Robert Wood Johnson Foundation

Author(s): D.M. Cutler

Topic: Health (Health care planning)

Type: Report


During the economic boom of the 1990s both wages and overall employment increased; yet, the share of the working-age population with private health insurance coverage decreased during that period. The author explored three potential explanations for this decrease: fewer employers offering health insurance to their employees, fewer employees being eligible for health insurance and more employees deciding not to enroll in health insurance plans. The annual March Current Population Survey, which asks about health insurance coverage in the previous year, provided data.

Results indicated that the percentage of employees offering health insurance (about 80%) was constant over the time period. The decline in eligibility from 93 percent in 1988 to 91 percent in 2001 was almost exclusively the result of more women working part-time and, therefore, generally not eligible for health insurance. Eligibility rates remained mostly constant for male, full-time workers. The major change was in fewer employees taking up the health insurance offered to them. The author reports that the “overwhelming reason people report for not taking up coverage is cost. People turn down health insurance because it is too expensive.”

Between the late 1980s and the late 1990s the annual amount paid by an individual to enroll in health insurance increased from about $150 to $350 and the portion paid by families increased from about $800 to $1,500. The author notes rising medical costs after several years of very low increases and suggests that continued increases could be associated with increased costs to employees and possible continued declines in health insurance coverage.