Fewer Workers Take Employer Health Plans as Costs Rise

February 7, 2007 (PLANSPONSOR.com) - A new study shows that the number of workers who enroll in a workplace health care plan goes down as employees' share of the coverage costs goes up.

A news release from the Kaiser Family Foundation said the group’s study showed that low-income workers were least likely to sign up for the employer coverage across the range of employer contributions.

Kaiser said there was a 5.8% fall in the take-up rate of employer-sponsored insurance for low-income workers from 1999 to 2002, while the decline in take-up for individuals above 200% of the poverty line during the same period was 1.5%.

Cost sharing efforts by employers were largely driven by health care cost increases during the period, which Kaiser said contributed to a decline in the number of firms offering insurance as well as encouraged firms to hire part-time or contract workers or to raise eligibility requirements.

Indeed, from 2000 to 2006, the number of firms offering health insurance benefits fell from 69% to 61%.

Using 2005 and 2006 data, the Kaiser study showed an 89% take-up rate for single coverage when employees paid nothing to a 68% take-up rate when workers paid 37% of the tab or more. For a family policy, there was a 90% take-up when employees paid 0% to 2.6% while the data showed a 77% rate when workers paid 56.3% or more of the cost.

“The results suggest that many workers will forego their employer’s coverage and could end up without any health insurance if required to pay too much of its cost,” Kaiser asserted in the news release.

The Kaiser researchers said that take-up rates fall as contribution percentage rises for workers in both small and large firms, with small firms having significantly lower take-up than large firms in three of the five contribution categories.

The lower take-up in small firms may reflect the relatively lower wages in small firms, or may indicate that, within these coverage categories, workers in small firms find the single coverage offered to them somewhat less attractive, relative to alternatives, than workers in larger firms, Kaiser said. Small firms have three to 199 workers and large firms have 200 or more employees.

According to Kaiser, about 160 million Americans get health insurance through their employer or a family member's employer. Premiums for employer-sponsored health coverage averaged $11,480 for family coverage in 2006, with workers required on average to pay $2,973 toward the cost of that coverage.

The study is based on data from the Kaiser Family Foundation/Health Research and Education Trust Employer Health Benefits Survey. A copy of the study is here .