Working Families' Health Insurance Coverage, 1997-2001

Originally published by the Center for Studying Health System Change (HSC). HSC was a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

Tracking Report No. 4 | August 2002 | Bradley C. Strunk, James D. Reschovsky

Despite a booming U.S. economy, falling unemployment, and moderate health insurance premium growth during the late 1990s, the share of working Americans and their families with employer-sponsored health insurance failed to increase meaningfully between 1997 and 2001, according to HSC's Community Tracking Study Household Survey. There were, however, dramatic shifts in the insurance status of people who lacked access to or chose not to accept employer coverage: fewer were uninsured, more enrolled in public programs, and coverage through individual insurance and other sources declined. While the State Children's Health Insurance Program (SCHIP) clearly reduced uninsurance among low-income children, evidence also suggested a fair amount of substitution of public insurance for private coverage.

Running in Place

The combination of strong economic growth, falling unemployment, and tight labor markets should have created ideal conditions for expanding employer-sponsored coverage. Annual premium increases remained low through most of this period, though they reached double digits by 2001. In theory, more employers should have offered health benefits to attract and retain workers. Yet the proportion of people in working families with employer coverage held essentially steady: of the 189 million nonelderly people in working families in 2001, 77.5 percent -- about 146 million -- had employer coverage, statistically unchanged from 1997.

About 12 percent of Americans in working families -- roughly 22 million people -- were uninsured in 2001, a modest decline from 1997. Growing enrollment in public programs like SCHIP drove this slight reduction. But signs indicated that the gain in public coverage was not drawn exclusively from the uninsured; some appeared to have shifted from private group and individual insurance to public programs.

Working Families Without Employer Coverage

About three-quarters of the 189 million people in working families in 2001 had access to and accepted employer coverage. Another 16 million people had access but declined it, and 30 million simply lacked access to employer coverage altogether. These 46 million people tended to have lower incomes, were more likely to report fair or poor health, and were more likely to work for small employers. Among the 30 million without access, 49 percent were uninsured, 21 percent enrolled in public programs, and 19 percent purchased individual coverage. Among those who declined employer coverage, public program enrollment jumped dramatically -- from 34 percent in 1997 to 47 percent in 2001.

Covering Kids: A Success Story

The most dramatic change occurred among children in low-income working families. The proportion of uninsured children fell by nearly 5 percentage points, from 20.4 percent in 1997 to 15.5 percent in 2001. Public program enrollment among these children surged more than 10 percentage points, from 21 percent to 31.3 percent. At the same time, employer coverage for low-income children dropped by 4.4 percentage points. Evidence suggested that a third to half of the growth in children's public coverage came from families who had access to employer-sponsored insurance but chose public coverage instead -- indicating some degree of crowd-out, though this substitution was not necessarily harmful given the financial burden private premiums placed on low-income families.

Running on Empty?

The failure of the economic boom to meaningfully expand employer-based coverage for working families was an ominous sign. With the economy softening and health insurance premiums returning to double-digit growth, the outlook for employer coverage expansion was tenuous. Those without employer coverage might also find it harder to access public programs as tight budgets led governments to constrain eligibility. The legacy of the 1990s boom may have been merely a short-term interruption in the long-running trend of more uninsured Americans. This suggested that relying on economic growth alone to reduce the number of uninsured was unlikely to work, and that substantial government funding would be needed -- whether through new public programs, subsidies, or other mechanisms.

Sources and Further Reading

Kaiser Family Foundation -- Employer Health Benefits Survey -- Annual data on employer-sponsored health insurance.

Health Affairs -- Peer-reviewed health policy research.

Robert Wood Johnson Foundation -- Health policy research and programs.

Commonwealth Fund -- Research on health care coverage.