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Health Care Costs and Financing

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Higher insurance premiums and expanded Medicaid eligibility have reduced family coverage in employer-related health plans

Between 1987 and 1996, the proportion of non-elderly Americans with employer-sponsored health insurance (ESI) declined. Roughly 80 percent of this decline was due to loss of coverage of dependent family members. According to a new study, the increase in out-of-pocket premium costs for family coverage (much more costly than single-person coverage) accounted for about half the decline in the rate of family coverage. Expanded eligibility for State Medicaid health insurance accounted for 14 percent of the decline.

Enhanced access to public insurance, together with the rise in out-of-pocket premium costs for ESI, may have induced some households to substitute public for private coverage, especially for dependent children, explain Alan C. Monheit, Ph.D., of the University of Medicine and Dentistry of New Jersey, and Jessica Primoff Vistnes, Ph.D., of the Center for Financing, Access, and Cost Trends, Agency for Healthcare Research and Quality. They analyzed data from a nationally representative sample of U.S. households in the 1987 National Medical Expenditure Survey and the 1996 Medical Expenditure Panel Survey.

Between 1987 and 1996, the employee cost of family coverage increased from $595 to $1,331 (1996 dollars) and the likelihood that a household member would be eligible for Medicaid increased from 5.9 to 13.6 percent. The researchers found a 5.57 percentage point decline in the rate at which households with dependent family members enrolled in ESI. They also found a 3.88 percentage point decline in the family coverage take-up rate among households enrolling in ESI. Together, the negative effect of increased family contributions and positive effect of rising single contributions accounted for roughly half the decline in family coverage, while expanded Medicaid eligibility accounted for 14 percent of the decline.

More details are in "The demand for dependent health insurance: How important is the cost of family coverage?" by Drs. Monheit and Vistnes, in the November 2005 Journal of Health Economics 24, pp. 1108-1131. Reprints (AHRQ Publication No. 06-R024) are available from the AHRQ Publication Clearinghouse.

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