Employment-Based Health Insurance

Most Americans under age 65 have health insurance, largely through their own or a family member's employment, but about 41 million people lacked health insurance in 1996. Concerned about insurers' willingness to offer policies to small employers and some individuals, Congress passed the Health Insurance Portability and Accountability Act of 1996 to improve access to health insurance. The legislation contains provisions relating to initial coverage, renewability, and portability of private health insurance. These provisions vary in their application to large and small employers who buy or wish to buy coverage for their employees as well as individuals trying to buy health insurance on their own. This report examines the (1) extent to which medium and large employers (those with 51 or more employees) in different categories and states have access to health insurance and the barriers these employers face in seeking health insurance, (2) major factors that affect employers' decisions to offer health insurance, and (3) extent to which employees are eligible for their employer-provided health plans.

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.