	Background

Support for employment-based health insurance by employers contributes to the health and financial security of employees and their families. Today, private health insurance offered through employment is the main source of health insurance coverage in the United States—in 1995, more than 90 percent of people under 65 years old with private insurance—150 million people—were insured through their employment. In the late 1980s, the cost of employment-based health insurance premiums significantly outpaced inflation. Between 1988 and 1989, employer costs for health insurance rose 18 percent in one year. 1.) Some employers stopped offering health insurance coverage altogether. These changes can provide significant savings for companies. By 1993, more than 29 million employees—almost one-fourth of the workforce—could not get employment-based health insurance for their families. From 1984 to 1993, the number of employees in large firms who were enrolled in managed care plans, such as HMOs, increased from 5 percent to 50 percent. Employers Increased Employees’ Contributions for Health Insurance, Particularly for Family Coverage

To offset increases in health insurance costs, some employers opted to have employees share in the costs of their insurance premium or increased their share of these costs. 3.) Median Monthly Premium Contributions (in Dollars)

		Health Insurance Is Expensive for Some Families

For some families, the overall rise in health insurance costs has made the current price of employment-based health insurance difficult to afford. In 1992, 36 percent of state and local employees paid $150 or more per month for family health insurance. Employers Use Other Strategies to Reduce Costs, Especially Those Associated With Family Coverage

Some changes that employers have made to their benefits packages may discourage employees from choosing family coverage. 6.) Loss of Dependent Coverage Accounts for Most of the Recent Loss in Private Coverage

As employers dropped coverage or raised the cost of coverage for employees and families, the percentage of people with private health insurance coverage declined. In 1989, 76 percent of working-age adults and almost 74 percent of children under 18 years old had private insurance. Both children and adults lost coverage as dependents. 7.) In contrast to the loss of adult dependent coverage, the percentage of working-age adults as the primary holder of private health insurance was similar in 1989 and 1995—51.6 percent compared with 51.4 percent. Unless the decline in private insurance coverage abates, public payers may be facing increased costs for health care—either for uncompensated care or public insurance. But more commonly, employers increased the amount employees had to pay to gain coverage, particularly for family coverage. The percentage of Americans under 65 years old with private health insurance decreased. If the availability of both public and private coverage continues to erode, the number of uninsured will inevitably continue to grow. Therefore, we focused on large and major firms. Additional copies are $2 each. A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the decline in employment-based health insurance, focusing on: (1) recent trends in employment-based private health insurance, particularly for family coverage; (2) any corresponding changes in the number of adults and children with private insurance coverage as dependents; and (3) the potential effect of these changes, if any, on public costs for health care coverage.

What GAO Found

GAO found that: (1) eroding employer financial support for providing health insurance to employees' families has contributed to the overall decline in private health insurance coverage; (2) each year between the late 1980s and 1994, increases in employers' costs to provide health insurance to their employees and their employees' families outpaced inflation, with cost growth of 18 percent one year; (3) as health insurance reached 10 percent of employees' payroll costs, many employers began to reconsider the amount of support they would provide to employees, particularly for family coverage; (4) acquiring or maintaining health insurance has become more difficult for some families because of changes that some employers made to their firms' health coverage; (5) some employers, particularly smaller employers, dropped coverage altogether; (6) in 1993, over 29 million employees, almost one-fourth of the workforce, were employed by firms that did not offer group health insurance for employees' families; (7) most employers continued to offer coverage, but many raised employees' premium contributions significantly, especially for family coverage; (8) in 1993, 16 percent of employees in large private firms paid $150 or more per month for family health insurance premiums and 36 percent of state and local government employees paid as much in 1992; (9) some employers have used other mechanisms that could discourage employees from two-worker families from purchasing family coverage from them; (10) as these changes occurred, the percentage of Americans under 65 years old with private health insurance coverage decreased from 75 percent in 1989 to about 71 percent in 1995; (11) of this general decline, about 70 to 90 percent was due to fewer working-age adults and children being covered as dependents; (12) between 1989 and 1995, the percentage of working-age adults (18 to 64 years old) with private insurance coverage decreased from 76 percent to 73 percent; (13) over these 6 years, the percentage of children under 18 years old with private health insurance decreased from more than 73 percent to 66 percent; (14) declines in employment-based dependent coverage can increase the number of uninsured Americans and shift a greater burden for health care onto public payers; (15) between 1994 and 1996, health insurance premium costs have been relatively stable, which may help slow the erosion of private coverage; and (16) however, unless the decline in employment-based insurance coverage abates, public payers could face increased costs for health care, either for uncompensated care or for public insurance.