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Erosion of Employer-Based Coverage Highlights Importance of Health Reform

The health reform law (Affordable Care Act) includes a number of provisions to strengthen the employer-based insurance system and improve access to affordable health coverage in other ways. Recent Census Bureau data show why such step are so important, as a new report by my colleague Matt Broaddus explains.

The number of uninsured rose by more than 4 million in 2009 to a total of 51 million, or more than one of every six Americans. The largest single-year increase on record (these data go back to 1987), it was the result of a continued decline in private health coverage — primarily in employer-sponsored insurance (ESI). Employer coverage rates fell precipitously for both children and working-age adults:

  • Imagen
    Only 56 percent of children had employer coverage in 2009, down 3 percentage points from 2008 and 9 percentage points from 1999.
  • Only 60 percent of working-age adults had employer coverage in 2009, down 3 percentage points from 2008 and 9 percentage points from 1999.

These declines reflect both the large job losses resulting from the recession and the increasing difficulty that employers and workers are having in financing health care coverage as costs rise.

If implemented successfully, the Affordable Care Act will reverse the trend of eroding employer-based coverage. Small businesses will receive financial support to offer coverage to their workers, larger employers will pay a penalty if they do not offer affordable coverage to their workers, and more employees will be encouraged to take up offers of employer-sponsored insurance under the individual mandate. All of these measures will strengthen the employer-based insurance market.

Other pieces of the health reform law will improve access to coverage as well. The law’s expansion of Medicaid will provide a coverage option to poor adults, an alarmingly high share of whom are uninsured. In addition, the new health insurance exchanges will make available more high-quality, affordable private coverage options to individuals and small businesses, particularly individuals suffering from serious health conditions, who largely are shut out of the current system.