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For U.S. Workers, Employment-Based Health Insurance Continues to Decline, Report Says

By Jane Norman, CQ HealthBeat Associate Editor

September 27, 2012 -- When it comes to health insurance coverage for those under 65 in the United States, research released last week shows the trends are like two trains rushing past one another: Coverage in public programs is growing, while traditional private insurance through employers is contracting.

That will continue, predicts a report written by Paul Fronstin, of the nonpartisan Employee Benefits Research Institute (EBRI), who dove deep into recently released census numbers. "Until the economy gains enough strength to have a substantial impact on the labor market, a rebound in employment-based coverage is unlikely," the report said.

EBRI also found that those Americans who still have employer-based insurance are far more likely to earn more than $75,000 a year, work in a managerial or professional occupation, be employed by a big firm—and be white. Where a person or his or her spouse works is the most important factor in determining whether he or she is insured.

The report by the organization gives a glimpse into the makeup of the working-age uninsured population likely to be enrolling in Medicaid or buying policies in the state-based or federal health insurance exchanges once they are up and running in 2014 under the health care law (PL 111-148, PL 111-152). Many are in the South. For example, in 13 states, uninsured people made up 20 percent or more of the population between 2009 and 2011, said the report. Those states are Arkansas, Arizona, California, Florida, Georgia, Louisiana, Mississippi, Montana, Nevada, New Mexico, Oklahoma, South Carolina and Texas.

The report also says that in general, employers want to provide health insurance because it makes for a better workforce - but may reconsider if the economy continues to be sour or the health care law "changes the value proposition" of offering insurance, thus speeding up the trend toward less employer-based insurance.

Health insurance is the benefit most valued by employees and provides them with a hedge against devastating losses from sickness, notes Fronstin. Employers offer it to increase productivity and raise esteem. But that may shift, the report cautions, because "the recent enactment and ongoing implementation of federal health reform legislation may change that equation." Employers are penalized under the law for not offering affordable health insurance, but opponents of the overhaul have warned that many businesses may decide to pay the penalty rather than sustain the costs of adding coverage. Studies have been mixed on whether that will happen.

The institute, a private group based in Washington that studies issues such as health, retirement and savings, based its study on the latest 2011 numbers from the census on the uninsured, focusing on the non-elderly population, those under 65. It found that employer-based health insurance for this group shrank again in 2011, to 58.4 percent, compared to 69.3 percent in 2000.

At the same time, EBRI said, 22.5 percent of the non-elderly in 2011, or more than a fifth of the population, were enrolled in a public program. That's compared to 14.1 percent in 1999. Sources of coverage for this group include Medicaid, the Children's Health Insurance Program, Medicare for people with disabilities, Tricare and veterans' health benefits.

And 7.1 percent of Americans bought their insurance in the individual market, a target for major overhaul in the health care law.

Fronstin noted that overall, the percentage of people under 65 with some kind of insurance coverage actually increased between 2010 and 2011, the first time that's happened since 2007, even if it's a slight rise. Now 82 percent of these Americans have health insurance, up from 81.5 percent in 2010. But 18 percent still lack insurance, though that, again, was slightly better than the 18.5 percent in 2010, the highest share of people without insurance between 1994 and 2010, the report said.

Who has employer-based health insurance, and who has the best health insurance? The report says 71.8 percent of people in families headed by a full-time, full-year worker had employer-provided insurance, compared to 34.2 percent of those in families whose head works part of the time and just part of the year.

The size of the employer matters, too. Nearly two-thirds of the uninsured—61 percent—either were self-employed or worked at companies with fewer than 100 employees, the report said.

Race is a stark divider. The report said 66.9 percent of whites had employer-based coverage in 2011, compared to 46.7 percent of blacks and 38.8 percent of Hispanics.

As for profession, 33.3 percent of people who work in agriculture, forestry, fishing, mining and construction in 2011 were uninsured, which was even worse than people employed in the service industry—23.4 percent of them were uninsured. Among those in wholesale and retail trade, 19.5 percent were uninsured, and 15.7 percent of those in manufacturing lacked insurance.

It's about money, too. A third of people without insurance were in families with annual incomes of less than $20,000. That compared with 6.7 percent of those in families with annual incomes of $75,000 or more, the report said.

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