This Issue Brief discusses
recent trends in and the future of employment-based
health insurance benefits. It presents recent trends in
sources of health insurance, access to health benefits,
changes to benefit packages, and retiree health benefits.
It discusses the reasons underlying the trends, presents
the outlook for employment-based health insurance
benefits, and includes a discussion of defined
contribution health benefits.
The percentage of Americans under
age 65 covered by employment-based health benefits has
been increasing since 1994. Between 1994 and 1999, the
percentage of children covered by an employment-based
health plan increased from 58.1 percent to 61.5 percent.
For adults, it rose from 66.1 percent to 67.6 percent,
with the increase mainly occurring between 1997 and 1999.
Between 1997 and 1999, the percentage of working adults
with employment-based health insurance increased from
72.2 percent to 73.3 percent.
Despite rising health insurance
costs, employers increasingly have been offering health
benefits to workers. Between 1998 and 2000, the
percentage of small firms offering health benefits
increased from 54 percent to 67 percent.
Health insurance cost inflation has
been increasing since 1998. Yet, employers have not
started to shift recent cost increases onto workers. The
percentage of the premium that workers have been asked to
pay has not been increasing, while the benefits package
has been improving.
The strong economy and low
unemployment have had an effect not only on the
likelihood that an employer offers health benefits and
the percentage of the premium that workers pay, but also
on certain aspects of the benefits package.
As a result of FAS 106, many
employers began a major overhaul of their retiree health
benefits program, and some dropped the benefits
completely. Most employers continuing to offer retiree
health benefits have made changes in the benefit package.
The most common change is in cost-sharing provisions,
with employers asking retirees to pick up a greater share
of the cost of coverage. The recent case Erie County
Retirees Association v. County of Erie may accelerate
changes to retiree health benefit programs.
Two factors will likely play
primary roles in driving the future of the
employment-based health benefits system: health benefit
costs and labor market conditions.
As long as health benefit costs
continue to increase, employers will seek ways to reduce
these costs. However, as long as unemployment remains
low, employers will likely be unable to significantly
modify existing health benefit programs.
