Summary
Employers’ commitment to worker health established its roots as far back as the late 1800s, but it was during World War II that employers began to offer more formal health coverage. Employers today offer health coverage because of their belief that offering it has a positive impact on the overall success of the business. It can be argued that the Employee Retirement Income Security Act of 1974’s (ERISA’s) pre-emption of state law has created an environment of nationally uniform standards for employee benefit plans, thus giving employers the regulatory means to continue to offer health benefits as they do today. When the Patient Protection and Affordable Care Act of 2010 (ACA) was passed, predictions were made that employers would stop offering coverage. The impact of the ACA on availability of health coverage in the workplace has been the subject of considerable debate.
In this paper, we examine how the availability of employment-based health coverage has been changing. We examine employer sponsorship of coverage as well as employee eligibility for coverage.
Key Findings:
- The percentage of the nonelderly population with employment-based health benefits was at or near 70 percent from 1970 to 1989. By 2023, 60 percent of the nonelderly population had employment-based health coverage.
- In 2023, employment-based health coverage continued to be the most common source of health coverage among the nonelderly population.
- Across the period of 1996–2023, the percentage of employers offering health benefits was at a near record low in 2023, with less than one-half of employers offering health benefits in that year. However, it is important to put this number in context. During the same period, 2000 was the year with the greatest percentage of employers offering coverage — 59 percent. And the percentage has ebbed and flowed over time.
- The erosion in the percentage of employers offering health coverage has been limited to small employers. Between 1996 and 2023, the percentage of employers with 1,000 or more employees offering health benefits increased from 96.7 percent to 97.6 percent. Similarly, the percentage of employers with 100–999 employees offering health benefits increased from 92.7 percent to 95.6 percent. In contrast, among employers with 25–99 employees, the percentage offering health benefits decreased from 80.8 percent to 76.7 percent. It decreased from 64.9 percent to 51.8 percent among employers with 10–24 employees, and it decreased from 34.2 percent to 22.5 percent among employers with fewer than 10 employees.
- The overall percentage of employers offering coverage is heavily influenced by the fact that small employers are in large part responsible for the decline in coverage, and most employers in the U.S. are small.
- Despite the overall decline in the percentage of employers offering health coverage, the percentage of workers employed by private-sector employers who were eligible for health benefits (the eligibility rate) has been mostly constant since 1996, varying from a low of 75.4 percent in 2014 to a high of 81.3 percent in 1996. The eligibility rate has not changed much because, despite the fact that most employers are small, the majority of workers are employed by large firms.