While the estimated health insurance offer rates between large and small employers differ markedly, the offer rates among medium and large employers vary moderately by firm size and industry and somewhat more widely by state. Medium employers that do not offer health coverage generally have access to health insurance but may decide for various reasons that they do not need to offer health benefits as part of their employee compensation package or may consider the cost of providing health coverage to be too high relative to their profits or employees’ wages. At the state level, the estimated offer rate among medium and large employers ranged from a low of about 72 percent in Wyoming and Texas to almost 100 percent in 14 states. The higher offer rates were concentrated in the Northeast, including the six New England states, New Jersey, and Pennsylvania. Differences in Offer Rates Reflect Firms’ Wage Levels and Other Traits

Although the likelihood of a firm’s offering health insurance is strongly linked with its size, whether an employer offers health coverage to its workers also depends on the characteristics of its workforce, the cost of providing health insurance, the firm’s financial condition, and the competitive environment in which it operates. For employees earning lower wages, paying the required share of premium costs may be prohibitive. Some research literature indicates that firms with high labor turnover rates are less likely to offer health insurance. As table 3 shows, in 1997, 31 percent of part-time employees were eligible for their employer-sponsored health insurance compared with 82 percent of full-time employees. Uninsured part-time employees accounted for about 27 percent of the 19.9 million uninsured wage and salary workers in 1997. As the evidence presented above shows, virtually all medium and large firms have access to health insurance. 104-191, Aug. 21, 1996) directed us to examine the extent to which classes of large employers in the different states have access to health insurance and the circumstances for the lack of access, if any. In consultation with the offices of the committees interested in the subject matter, we agreed to report on (1) the extent to which medium and large employers in different states and categories have access to health insurance and the barriers (if any) that these employers face in obtaining health insurance; (2) major factors, including health insurance costs, that affect employers’ decisions to offer health insurance; and (3) the extent to which employees are eligible for and covered by their employers’ health insurance. People may decline to enroll for a variety of reasons, including not being able to afford the insurance or having coverage through another source, such as another family member’s coverage.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the extent to which classes of large employers in different states have access to health insurance and the circumstances surrounding the lack of access, if any, to coverage, focusing on: (1) the extent to which medium and large employers in different categories and states have access to health insurance and the barriers, if any, these employers face in seeking health insurance; (2) major factors that affect employers' decisions to offer health insurance; and (3) the extent to which employees are eligible for their employer-provided health plans.

What GAO Found

GAO noted that: (1) virtually all medium and large employers have access to group health insurance, and about 90 percent actually offer health coverage to their employees; (2) the larger the firm the more likely it is to offer health insurance; (3) employers that do not offer health insurance are likely to be influenced by a variety of factors such as firm size, the wage level, and health insurance premiums; (4) sponsorship of health insurance by medium and large employers varies moderately by industry sector and somewhat more widely by state; (5) across the states, estimated offer rates among medium and large employers ranged from 72 percent in Wyoming to close to 100 percent in 14 states in 1993; (6) the highest offer rates were concentrated in the Northeast, including the six New England states, New Jersey, and Pennsylvania; (7) the propensity of an employer to offer health insurance depends not only on the firm's size but on other, often interrelated workforce and firm characteristics, including employee earnings, labor turnover, and health insurance cost; (8) by contrast, some medium employers may be less likely to offer coverage if they believe that lower-wage employees would not enroll in the plans; (9) in addition, medium employers may be less likely to offer coverage if insurers charge high premiums to cover the higher administrative costs of handling smaller groups or the greater variability of a smaller group's costs due to a catastrophic medical case; (10) data on the prevalence of these circumstances are not available; (11) some employees of medium and large firms do not have access to their employers' sponsored health plan because of eligibility requirements; (12) the eligibility rate of part-time employees was about 31 percent in contrast to a rate of more than 80 percent for full-time workers in 1997; (13) although the majority of part-time employees nationwide have coverage--mostly through another family member's job or nonemployment sources--5.4 million were uninsured in 1997; and (14) uninsured part-time employees represented about 27 percent of the roughly 19.9 million uninsured wage and salary workers that year.