Great Recession Accelerated Long-Term Decline of Employer Health Coverage

Great Recession Accelerated Long-Term Decline of Employer Health Coverage

NIHCR Research Brief No. 8 | March 2012 | By Chapin White and James D. Reschovsky

The share of children and working-age adults in the United States covered by employer-sponsored health insurance fell sharply between 2007 and 2010, dropping 10 percentage points from 63.6 percent to 53.5 percent. This steep decline was driven primarily by the massive job losses that accompanied the Great Recession, which officially ran from December 2007 through June 2009. During the same three-year window, the proportion of the under-65 population living in families with no employed workers jumped from 21.6 percent to 31.6 percent -- a 10 percentage point spike that mirrored the coverage losses.

Who Lost Coverage

The erosion of employer-based coverage hit certain groups harder than others. Young adults, individuals with a high school education or less, and workers at small firms experienced disproportionately large losses. Among children and working-age adults in families earning below 200 percent of the federal poverty level -- $44,100 for a family of four in 2010 -- the share with employer coverage plummeted from 42 percent in 2001 to just 24 percent by 2010.

A Decline Already Underway Before the Recession

The recession accelerated a downward trend that had been building for years. Well before the economy contracted, employer-sponsored coverage was steadily eroding as fewer companies offered insurance and fewer workers enrolled in available plans. Health care costs that climbed faster than wages made employer-provided coverage unaffordable for a growing share of the workforce, particularly those earning lower wages. The recession intensified both of these ongoing dynamics.

Even once employment eventually returned to pre-recession levels, a recovery to previous rates of employer coverage was considered unlikely. The fundamental challenge remained that medical costs continued outpacing wage growth, steadily pricing more workers out of the employer-based system. The recession did not create this structural problem -- it exposed and deepened it.

Public Coverage Fills the Gap

Many Americans who lost workplace coverage between 2007 and 2010 transitioned to publicly funded health insurance. The national health reform law, with its planned Medicaid expansion and new subsidies for purchasing nongroup insurance through exchanges, was designed to further extend coverage to the growing population of Americans without access to employer plans. These policy interventions represented an acknowledgment that the employer-based system could no longer serve as the near-universal foundation for working-age health coverage that it once had been.

Sources and Further Reading

This analysis was originally published as NIHCR Research Brief No. 8 by Chapin White and James D. Reschovsky through the National Institute for Health Care Reform, affiliated with the Center for Studying Health System Change.