Ranks of Uninsured Up as Employment-Based Coverage Drops

The number of Americans without health insurance coverage grew last year amid a decline in the share of people covered by employment-based health insurance.

Those findings, revealed Tuesday (August 29) in a report from the U.S. Census Bureau, mean businesses spent less than they otherwise would have last year on direct health care benefits. But that’s not necessarily great news for U.S. employers, says Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute, a Washington, D.C., organization financed by companies and unions.

Fronstin says that the erosion of employer-based care since 2001 may be backfiring in the form of a less healthy, less productive population and higher taxes stemming from the cost of treating uninsured people in public hospitals.

“The fact that we’ve got 46 million people without health insurance really puts pressure on the system,” Fronstin says. “Not only the health care system, but the bottom line of business.”

The Census Bureau reported that the number of people without health insurance coverage rose by 1.3 million to 46.6 million in 2005. The percentage of Americans without coverage climbed from 15.6 percent in 2004 to 15.9 percent last year. The percentage of people covered by employment-based health insurance declined from 59.8 percent to 59.5 percent, according to the government report.

The same report found that real median household income in the United States rose by 1.1 percent from 2004 and 2005, reaching $46,326. But real median earnings of both men and women who worked full time year round declined. The nation’s official poverty rate remained statistically unchanged at 12.6 percent.

One factor behind the higher number of uninsured people is the rising cost of health insurance. A report last year from the Kaiser Family Foundation and the Health Research and Educational Trust found that premiums rose an average of 9.2 percent in 2005, more than three times the growth in workers’ earnings. That report said a drop in the percentage of firms offering health coverage to workers stems almost entirely from fewer small businesses offering health benefits. Nearly all businesses with 200 or more workers offer such benefits, according to the Kaiser Family Foundation study.

Alexander Domaszewicz, a consultant at Mercer Human Resource Consulting, says savvy large companies are looking at health benefits as a way to gain competitive advantage. Plans that foster a healthier workforce can give U.S. employers an edge versus foreign rivals that don’t have much control over the health care of their employees, he suggests.

“If they do it right, they can get an advantage over their international competitors because they improve productivity,” he says.

High health care costs and a large population of uninsured people also have sparked calls for some variety of national health care in the United States.

Fronstin doesn’t expect the latest numbers to trigger a major new effort to create a single-payer health care system. Nor does he see the news as reason to promote health savings accounts, given that HSAs tend not to make health care much more affordable for people. Instead, he expects businesses to offer, and individuals to take on, thinner coverage in the form of higher-deductible plans with limited care options.

“HSAs do not address affordability the way higher-deductible plans do,” he says.

—Ed Frauenheim