Access, Choices, and Household Income: A Comparison of Health Insurance Coverage for Standard and Nonstandard Workers

Article excerpt

Since 1989, the number of people in the United States who do not have health insurance has increased by 10.1 million to 44.3 million people, or 16.3 percent of the US population [Carrasquillo et al. 1999; Campbell 1999]. This is noteworthy because, except for a brief recession at the start of the decade, the 1990s were a period of economic growth. GDP steadily increased, inflation was not a problem, and unemployment rates fell to unprecedented lows. The fact that unemployment reached new quarter century lows while the number of uninsured grew seems counterintuitive since employment remains the leading source of private health insurance coverage. Falling rates of private insurance coverage during the 1990s are attributed to decreases in employer sponsored health insurance. The percentage of people covered by private health insurance dropped from 75.5 percent of the population in 1987 to 70.1 percent in 1997. In 1987, 62.1 percent of private insurance was employment based. This dropped to a low of 57.1 percent in the early 1990s. By 1997, the figure rebounded to only 61.4 percent (see Table 1).

Employer-provided health insurance has its roots in World War II. The war gave rise to wage and price controls, worker shortages, and strong unions. With wages frozen, firms that wished to attract good employees started to offer employment-based insurance as a fringe benefit. By the 1950s, large employers generally had high-quality health plans for their unionized workers. Nonunion employers matched or exceeded such health plans in part to avoid unionization [Kuttner 1999; Pauly 1997; GAO/HEHS-97-35]. Health coverage became part of the social contract of the post World War II era between employers and employees.

Most economists view employer payments for health insurance as a reallocation of employee compensation. However, many employers see health insurance premiums as money diverted from employer profit, and they see lower health insurance premiums as advantages for their stockholders [Pauly 1997]. Between 1980 and 1996, non-wage benefits grew faster than wages and salaries as a proportion of labor compensation. Employer's costs for total benefits grew roughly 50 percent faster than employee wages. By March 1996, non-wage compensation represented 28 percent of total compensation for U.S. private workers. To the extent that these benefits represent quasi-fixed costs, the structure of compensation packages may increase employers' demand for workers for whom they do not have to provide benefits [Lettau and Buchmueller, 1999].

Studies show that the drive by firms to cut costs, including the costs of employee benefits, loss of union voice, growth of the service sector low wage, low benefit jobs [Fallick, 1999], and the increase in non-standard and contingent employment [Hipple 1998; Levit et al. 1992; Kronick 1991] all contributed to the erosion of the social contract and the decline of employer-provided health benefits. Other studies show that decreasing rates of employer coverage were due to a growing percentage of employees declining coverage as premium costs and employee contributions rose [Carrasquillo et al. 1999; Cooper and Schone 1997]. The out-of-pocket price of insurance premiums matters when employees decide whether or not to take up employer provided health insurance when the employer does not cover all of the premium costs [Francis 1995; Buchmueller and Feldstein 1997].

Studies identify nonstandard, contingent, and part-time workers as being less likely to have employer sponsored coverage [e.g., Wiens-Tuers 1998; Hipple and Stewart 1996; Cohany 1998; Kalleberg et al. 1997; Campbell, 1999]. Regression results from a paper by Marianne Ferber and Jane Waldfogel [1998] indicate that both men and women who are, or ever have been, in any type of nontraditional employment are far less likely to have benefit coverage than those who were always in traditional jobs. At the same time, while the decline in health insurance has been widespread, coverage declined more quickly for low-income families [GAO/HEHS-97-122]. …