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June 2008, Vol. 131, No. 6
Employers’ health insurance cost burden, 1996–2005
Christine Eibner and M. Susan Marquis
In 2005, 62 percent of nonelderly Americans obtained health insurance coverage through employer-sponsored health insurance plans.1 Many recent proposals to expand health insurance coverage build on the employer-based system. Both the Massachusetts health reform plan and the California Governor’s health care reform proposal include mandates requiring employers either to offer health insurance or pay a fee. Yet, simultaneously, concerns over increasing health care costs have raised questions about the sustainability of the employer-based system.2 One source cites figures which imply that total health spending in the United States increased by 93 or 94 percent between 1996 and 2005, compared with a 51-percent rise in gross domestic product.3 Most economists believe that health insurance premium costs are ultimately passed back to employees in the form of reduced wages, so long-run compensation costs for employers are not affected by rising health care prices. But in the short run, if employers are unable to shift costs fully to workers, the increased cost of health insurance may cause labor market distortions, such as the hiring of more part-time workers who do not qualify for health benefits.4 In addition, employers may be unable to shift health care costs to employees who are at or near the minimum wage.
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1 Paul Fronstin, Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2006 Current Population Survey, Issue Brief No. 298 (Washington, DC, Employee Benefit Research Institute, 2006).
2 See the following two articles in the November–December 2006 issue of Health Affairs: Robert S. Galvin and Suzanne Delbanco, "Between a Rock and a Hard Place: Understanding the Employer Mind-Set," pp. 1548–55; and Alain Enthoven and Victor R. Fuchs, "Employment Based Health Insurance: Past, Present, Future," pp. 1538–47.
3 Paul B. Ginsburg, Bradley C. Strunk, Michelle I. Banker, and John P. Cookson, "Tracking Health Care Costs: Continued Stability but at High Rates in 2005," Health Affairs, November–December 2006, pp. w486–95.
4 Katherine Baicker and Amitabh Chandra, The Labor Market Effects of Rising Health Insurance Premiums, NBER Working Paper No. 111602005 (Cambridge, MA, National Bureau of Economic Research, 2005).
Related BLS programs
Employee Benefits Survey
Employment Cost Trends
Federal statistics on healthcare benefits and cost trends.—Nov. 2004.
Who really has access to employer-provided health benefits?—June 1995.
Health insurance trends in cost control and coverage—Sept. 1986.
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