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Study Finds Health Benefits, Not Wages, Key to Increasing Coverage

By Jesse Stanchak, CQ Staff

February 20, 2008 -- Higher wages alone won't reverse the declining number of Americans with health insurance if employers aren't offering their workers coverage, according to a study by researchers at the Urban Institute published as a Web Exclusive by the journal Health Affairs on Wednesday.

The study found that the average number of Americans who lost their insurance each year increased faster during the economic recovery of 2004–2006 than the recession years of 2000–2004. The study concludes this is because the number of Americans receiving coverage from their jobs continued to decline, while wage increases failed to match growing insurance premiums.

"In good economic times and bad, the dominant factor behind the growing number of uninsured was the decline in employer-sponsored health coverage," study lead author John Holahan says.

During the recession of 2000–2004, when real median household wages fell from $49,163 to $47,323, the poverty level rose from 11.3 to 12.7 percent and the number of uninsured rose by 6 million.

In contrast, between 2004 and 2006, median real income levels rose by nearly $800 and the poverty rate fell by 0.4 percent, two common indicators of a robust economy. Yet the number of uninsured Americans increased by 3.4 million during those years, to an annual average rate of 1.7 million newly uninsured persons during 2004–2006, versus an average of 1.5 million during the recession years of 2000–2004.

Half a million of those newly uninsured workers between 2004–2006 lost their insurance because of cuts to employer-sponsored coverage. The study concludes that because companies are reluctant to pass the cost of premiums onto their employees in the form of lower wages, they are more inclined to cut costs by eliminating health insurance benefits.

The study also found that on average wage increases do not keep pace with increases in health insurance premiums. Between 2004 and 2006 insurance premiums increased an average of 8.4 percent each year, while wages increased just 3.5 percent each year.

Two million of those losing coverage were below 200 percent of the poverty line, the study found. Coverage for workers under 200 percent of the poverty line saw a 6.2 percent decline, compared with 1 percent for all non-elderly Americans.

Population increases also are a factor in rising rates of the uninsured. The U.S. population rose by 10 million people between 2000 and 2004 and by another 10 million people between 2004–2006. The study also concludes that illegal immigrants are a factor in the rising number of uninsured persons, comprising about 20 percent of the newly uninsured. The study found that the biggest decline in employer coverage came in the southern and western parts of the country, where population levels are rising faster and there are fewer manufacturing jobs.

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