Changing Business Landscape Impacting Health Benefits

Despite the growth of the U.S. economy in recent years, the number of workers without health insurance continues to increase. Much of that increase is due to the proliferation of small companies, which often do not offer employee insurance programs, new data indicate.

A study by the Urban Institute pointed out that the health of the overall economy improved from 2003 to 2005, compared with the 2000 to 2003 period, as measured by changes in families' work status. However, the number of workers with employer-sponsored health insurance dropped each year throughout the more recent period.

“The number of uninsured grew in 2005, primarily because of the continued decline in employer-sponsored insurance, which has declined throughout this decade, but at a little slower rate in the last couple of years,” said John Holahan, director of the Health Policy Center at the Urban Institute, during a Capitol Hill briefing in October on the future of health insurance.

The study sought to explain the reasons behind the U.S. Census Bureau finding that the number of uninsured increased by 1.3 million Americans in 2005 from 44.8 million to 46.1 million, despite an improving economy. That increased the overall uninsured population to about 7 million since 2000.

The study found that much of the job growth during those five years came from small firms and individuals going into business for themselves, companies that are less likely to insure their workers. From 2000 to 2005,“ self-employed” firms added 1.7 million workers, but only about half of those provided insurance. Likewise, small firms hired 2.3 million additional workers but provided insurance coverage for only 53 percent of employees. In contrast, large firms, 81 percent of which provide insurance for employees, shed 600,000 workers in that half decade.

In addition, companies that had high rates of employer-sponsored insurance lost 2 million workers between 2000 and 2005, while industries with low rates of employer-sponsored insurance added 5.6 million workers.

“Why that is significant is that it means that we're moving toward places of work where we are less likely to have employer coverage and more likely to be uninsured and away from those larger firms where the rates of employer-sponsored insurance are greater,” Holahan said.

Population Shifts Have Impact

The changes are likely to continue, the study suggested, because the population is shifting toward the South and the West, where employer-sponsored insurance rates are lower and “un-insurance rates” are higher.

The study data also showed that by 2005, Medicaid and SCHIP—the insurance program for low-income children—were no longer growing to fill the gap in insurance as those programs had done at least partially in preceding years.

The report found that declines in employer-sponsored insurance were greatest among children from low- and middle-income families, where the number of uninsured children increased by 300,000 in 2005, reversing the small gain that had occurred in the previous four years.

A secondary factor that contributed to the rise in the number of uninsured, the study found, was that more employees turned down insurance coverage offered by their companies.

The studies predicted that health insurance premiums are likely to continue to grow faster than family incomes, which will lead to further declines in job-based coverage and a continued loss of, or inability to take advantage of, employer-sponsored insurance.

Solutions Offered

Charles Kahn III, president of the Federation of American Hospitals, said during the Capitol Hill briefing that change is more likely to come sooner if policymakers focus on providing health care coverage to the 15 percent of Americans without it, rather than revising the health coverage of all Americans, Kahn said.

Jeanne Lambrew, an associate professor at the Center for American Progress at George Washington University, countered that a program that focused only on the uninsured would not prevent more people from falling into that situation. Rather than such a narrow focus, she said, only a “major comprehensive health reform” will effectively address the continued rise in the number of uninsured.

Holahan said he doubted that the federal government would ever endorse a single-payer program or an employer insurance mandate. However, he added, a requirement that individuals obtain health insurance, along with “a purchasing arrangement with generous and adequate subsidies” might be effective and fair.

When the possibility of tax incentives and tax credits were raised as a way to spur low-income individuals to obtain insurance, Kahn said he doubted the tax code was an appropriate vehicle to encourage such a change.

“If we're talking about an advanced refundable tax credit, why don't we just get real about it and say we're going to give certain people vouchers and then design a voucher program, rather than trying to go through all the hoops in the tax structure?” he asked.

The Urban Institute study “Why Did the Number of Uninsured Continue to Increase in 2005?” is posted at<http://kff.org/uninsured/upload/7571.pdf>.▪