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Changes In Insurance Coverage: 1994–2000 And Beyond
The number of
uninsured Americans fell in 2000 for the second consecutive year. The
reduction has been attributed to the continued expansion of
employer-sponsored insurance. However, the increase in employer coverage
among adults was offset by declines of other types of coverage. For
children, increases in public coverage plus the growth in
employer-sponsored insurance led to the reduction in the number of
uninsured children. Over the longer period (1994–2000), one of great
economic growth, the uninsurance rate was essentially the same at the end
as at the beginning. The rate of employer-sponsored insurance increased
sharply, so that more people had employer coverage. However, these
increases were offset by reductions in other forms of coverage,
particularly Medicaid and state-sponsored insurance and private nongroup
coverage, so the overall rate of uninsurance did not change. For the
second consecutive year the Current Population Survey (CPS) revealed that
the number of uninsured non-elderly Americans fell in 2000. The number of
uninsured declined by 570,000; uninsured children actually declined by
700,000, while the number of uninsured adults increased by 130,000. The
primary reason for the reduction in the number of uninsured at first
glance appears to be the increase in employer-sponsored coverage.1 However,
expansions in employer coverage occurred for both children and adults. It
was the additional expansions in Medicaid and state program coverage
(particularly the State Children’s Health Insurance Program, or SCHIP)
for children that led to the reduction in the uninsured rate for children.
Similar reductions in uninsurance were not observed for adults where the
increases in employer coverage were offset by declines in other types of
coverage. During
1994–2000, a period of great economic prosperity, the rate of
uninsurance remained essentially unchanged at around 17 percent. The
period’s prosperity brought extraordinary changes in income
distribution. The number of low-income Americans fell by 8.2 million,
while the numbers of middle- and high-income Americans rose by 2.0 million
and 19.2 million, respectively. Among each of the three income groups,
however, uninsurance rates actually increased. It was the movement of so
many people up the income distribution, where uninsurance rates were
lower, that kept the uninsurance rate essentially level over the period. The rate of
uninsurance stayed constant despite large increases in employer-sponsored
insurance—from 64.3 percent in 1994 to 67.3 percent in 2000. This
increase, together with population growth, resulted in a 15.9 million
increase in the number of Americans with employer coverage. Although more
low-income Americans (those with family incomes below 200 percent of the
federal poverty level) gained coverage, the primary reason for the overall
increase was, again, the large movement up the income distribution. The
period’s tight labor markets allowed people to take jobs with higher
earnings and a higher likelihood of employer coverage. Why didn’t employer coverage have more of an impact on the uninsurance rate between 1994 and 2000? The primary reason is a decline in coverage in public programs such as Medicaid and other state-subsidized insurance. As the economy improved, many low-income persons left Medicaid, obtained higher-paying jobs, and enrolled in employer plans. The enactment of welfare reform in 1996 also contributed to reduced public coverage among low-income Americans. (In the late 1990s this was partly offset by the introduction of SCHIP.) Private nongroup coverage also fell; this could be attributable to problems in the individual insurance market, but it also might reflect the fact that as labor markets tightened, workers were more likely to obtain insurance through their jobs. Finally, there was also a large reduction in coverage through federal programs such as military and Medicare coverage.2 Declines in all of these types of coverage may have been independent of the growth in employer coverage. Alternatively, the growth in employer coverage may have displaced other forms of coverage. In either case, Americans were no less likely to be uninsured even amid tremendous economic growth. The 1994–2000 period actually consisted of two subperiods. Between 1994 and 1998 the increase in employer coverage was more than offset by declines in Medicaid or state coverage, other public coverage (principally military), and private nongroup coverage; the result was a larger number of uninsured persons.3 After 1998, Medicaid and state coverage stabilized, and the increase in employer coverage reduced the number of uninsured persons.4 In this paper
we first examine changes in insurance coverage between 1999 and 2000
because of the recent attention given to the smaller number of uninsured
persons in 2000. We then put the same data in the context of a longer
period, the economic boom of the 1990s. We examine CPS data from 1994
through 2000, showing changes in both private and public coverage and in
the uninsurance rates for adults and children. An important
change has been made in the CPS over the past two years: Namely,
respondents were asked to confirm the lack of insurance for household
members. Prior to the March 2000 CPS, individuals were asked if anyone in
their household had any of several forms of insurance. Those who did not
indicate having some form of insurance were regarded as being uninsured.
In the March 2000 (and 2001) CPS, respondents were asked to verify that
the lack of a positive indication of some form of coverage really meant
that they were uninsured. The verification question in 2001 reduced the
percentage of nonelderly uninsured persons from 17.2 percent to 15.8
percent (41.9 million to 38.4 million).5 The first
section of this paper analyzes the verified CPS data. Thus, the rates of
uninsurance presented here are lower than they have been in previous
analyses. In the second section, where we explore changes in coverage that
occurred between 1994 and 2000, we turn to the unverified data because
they were the only data available before the March 2000 CPS. The following
discussion presents CPS data categorized by insurance type, income, and
other characteristics. Although CPS survey respondents were able to choose
multiple types of health insurance on the surveys, their responses were
classified in a hierarchy, with each respondent assigned only one type of
coverage.6 To analyze
income, respondents were grouped by their total health insurance unit
income in relation to census poverty thresholds.7 Changes In Insurance Coverage, 1999 And 2000 Coverage by income group. Looking only at the aggregate changes in the insurance distribution
from 1999 to 2000, one sees a small decline in the uninsurance rate and
570,000 fewer persons lacking insurance (Exhibit
1). For all income groups, employer coverage increased by about
one percentage point; the increase in the coverage rate coupled with
population growth (2.07 million) added 3.33 million to the ranks of
Americans insured through an employer. The rate of coverage by Medicaid,
SCHIP, and other state programs did not change, but population growth
alone added 230,000 persons to Medicaid or other state coverage. Declines
in private nongroup coverage somewhat offset the increase in employer
coverage rates. This general
trend masks some interesting and important changes that occurred within
the overall aggregate. Changes in coverage rates affected income groups
differently; in addition, there were large income gains. In particular,
the number of persons below 200 percent of poverty fell by 2.27 million;
the number at 200–400 percent of poverty increased by 2.6 million; and
the number above 400 percent of poverty increased by 1.74 million. Insurance
coverage improved among persons below 200 percent of poverty, and there
were fewer low-income individuals in 2000 than in 1999 (Exhibit
1)—the strong economy seemed to move many into higher-paying
jobs. Also, the rate of employer coverage and of Medicaid/state coverage
also rose (together these increases were significant). Because the
low-income population declined, there was no change in the number of new
enrollees in Medicaid and other state programs despite the increase in the
rate of coverage. As a consequence of the increased likelihood of both
employer and Medicaid/state coverage, the uninsurance rate for low-income
persons fell. This decline, coupled with the decline in the low-income
population, meant that the number of low-income Americans without health
insurance fell by 1.67 million. The
middle-income population did not fare as well. The rate of employer
coverage fell, probably because, as wages in many low-skill jobs rose,
many families moved above 200 percent of poverty without obtaining health
insurance at the same rates as those enjoyed by persons already in this
income group. Because the number of middle-income Americans increased, the
number of middle-income Americans with employer coverage increased by 1.27
million. The result was an increase in the uninsurance rate and 1.18
million more uninsured persons. Thus, the increase in the number of
uninsured middle-income Americans offset much of the decline in the number
of uninsured low-income Americans. The picture was strikingly different for high-income Americans. Because employer coverage increased and because there was an overall increase in the number of Americans above 400 percent of poverty, the number with employer coverage increased by 2.17 million. The uninsurance rate was unchanged, but because of population growth, there was a net decrease of 80,000 in the number of uninsured high-income Americans. Coverage of children.
Much of this general picture holds true for children, with some important
differences (Exhibit
2). Children benefited from an increase in employer coverage,
but again this seemed to be largely due to the income gains experienced by
families with children coupled with an increased rate of employer coverage
among children in high-income families. Children also benefited from
increases in Medicaid/state coverage. Together these increases offset a
decline in private nongroup coverage, resulting in 700,000 fewer uninsured
children. Among
children with family incomes below 200 percent of poverty, Medicaid/state
coverage increased by almost two percentage points or by 260,000 children,
probably reflecting the growth of SCHIP, which also is believed to have
raised the number of children on Medicaid.8
This increase would have been greater had it not been for the 820,000
decline in the number of children below 200 percent of poverty, which
removed many of them from program eligibility. The number of low-income
children with private nongroup coverage also fell. The net effect of these
partially offsetting changes was 760,000 fewer uninsured low-income
children. A somewhat
different picture emerges for middle-income children. Because of the
growing economy, 480,000 more children were in the middle income bracket
in 2000. While children in families that experienced income gains were no
doubt more likely to have employer coverage than they were before, the
rate of employer coverage for middle-income children in 2000 nonetheless
fell relative to 1999. At the same time, 180,000 middle-income children
gained coverage through public programs, presumably SCHIP. The increased
public coverage was not enough to offset the increase in population and
the decline in employer coverage; thus, the number of uninsured
middle-income children rose by 180,000. Employer
coverage rates increased among children with family incomes above 400
percent of poverty—920,000 children gained access to employer coverage.
This increase offset a decline in private nongroup coverage; as a result,
there were 120,000 fewer uninsured high-income children. Coverage of adults. Adults also benefited from increased employer coverage, but for them there was no expansion of public coverage comparable to SCHIP (Exhibit 2). The increase in employer coverage was offset by small declines in each of the other types of coverage (significant as a group); as a result, the uninsurance rate did not change. Population growth caused the number of uninsured adults to rise by 130,000. The number of
low-income adults without insurance fell by 910,000, primarily because of
a 1.45 million decline in the number of low-income adults. None of the
coverage changes was significant. As with children, middle-income adults
were hurt by a lower rate of employer coverage, for reasons explained
above. The uninsurance rate increased, and the number of uninsured
middle-income adults rose by 1.01 million, which offset the decline in
uninsurance among low-income adults. The number of
high-income adults with employer coverage rose by 1.25 million, slightly
more than the increase in the number of adults above 400 percent of
poverty. The increase in the number with employer coverage was offset by a
small decline in the number with military and Medicare coverage; the
number of uninsured high-income persons did not change. Coverage of low-income children and adults.
Exhibits
3 and 4
show insurance coverage changes for children and adults below 300 percent
of poverty in more detail. The number of uninsured children below poverty
fell by 320,000. Tighter labor markets seem to mean that even poor
children gained employer coverage, although these rates are still very low
(increasing from 20.4 percent to 21.6 percent, not significant). For these
poor children, Medicaid/state coverage was stable. The number of uninsured
children below poverty fell primarily because of the overall decline in
the number of those children. The picture
is different for children between 100 and 199 percent of poverty. The rate
of employer coverage for them was much higher than it was for those below
poverty but did not change. However, Medicaid/state coverage rose
significantly. There was an increase of 510,000 in the number of children
with Medicaid/state coverage despite the fact that the number of children
between 100 and 199 percent of poverty fell by 130,000 (not shown). This
seems likely to be attributable to SCHIP, which targeted much of this
income group. The large increase in Medicaid/state coverage is also
associated with a drop in private non-group coverage but no significant
change in employer coverage. Among
children between 200 and 299 percent of poverty, employer coverage rates
were much higher than for low-income children, but they actually fell two
percentage points. This decline meant that 290,000 fewer children had
access to employer coverage (not shown). Some of this was offset by
increased coverage of children in Medicaid/state programs, presumably
SCHIP, but overall the number of uninsured middle-income children
increased by 100,000. Among adults
(Exhibit
4), changes in employer coverage were similar to those for
children, but adults did not benefit from public program expansions to the
extent that children did. Among adults below poverty, there were no
significant changes in any kind of coverage. Similarly, among adults
between 100 and 199 percent of poverty, there were no significant changes
in employer or private non-group coverage. There also was no change in
Medicaid/state coverage. As a result, the uninsurance rate did not change,
but population changes resulted in a decline of 240,000 uninsured adults
at this income level. In contrast, the number of uninsured adults between
200 and 299 percent of poverty rose by 630,000. Employer coverage declined
for this group, and again, adults did not benefit from public program
expansions. However, it was primarily the growth in the number of adults
in this income bracket that led to an increase in the number of uninsured
persons. Exhibits
5 and 6
show what has happened to various kinds of insurance coverage between 1994
and 2000, the entire period of the economic boom of the 1990s. This was
also the period in which state and federal welfare reform reduced the
number of persons receiving cash welfare benefits. Here we rely on the
unverified CPS data; thus, the uninsurance rates for 2000 are higher than
shown in earlier exhibits. Surprisingly,
between 1994 and 2000 the uninsurance rate for the nonelderly was nearly
unchanged. As noted above, this number stayed constant despite the fact
that the aggregate rate of employer coverage rose three percentage points.
As employer coverage was growing throughout the entire period, Medicaid
coverage fell between 1994 and 1998 and then leveled off. There were also
reductions in military/Medicare and private non-group coverage. These
declines offset the increase in employer coverage. The
subperiods of 1994–1998 and 1998–2000 tell different stories. In the
earlier period, declines in Medicaid/state and private non-group coverage
more than offset the increase in employer coverage; thus, the overall
uninsurance rate rose. After 1998 the increase in employer coverage more
than offset the declines in other kinds of coverage, and the uninsurance
rate fell. Between 1994
and 2000 a major change took place in the income distribution, resulting
in fewer low-income Americans and many more with incomes above 400 percent
of poverty (Exhibit
5). The rate of employer coverage rose for persons below 200
percent of poverty. However, it fell for middle-income Americans and
stayed roughly constant for those above 400 percent of poverty. Thus,
there were fewer low-income Americans, but those whose incomes stayed low
were more likely to have employer coverage at the end of the period than
at the beginning. As many moved up the income distribution, they were far
more likely to obtain employer coverage than they had been before, but
middle-income Americans as a whole were less likely to have employer
coverage in 2000 than in 1994. For those
below 200 percent of poverty, the rate of Medicaid/state coverage fell two
percentage points, with the entire decline occurring prior to 1998.
Private nongroup coverage also fell; the result was a one-percentage-point
increase in the uninsurance rate from 1994 to 2000. Thus, the rise in the
rate of employer coverage was not sufficient to offset the declines in
Medicaid/state and private nongroup coverage for persons below 200 percent
of poverty. For
middle-income Americans, the decline in employer coverage together with
reductions in military/Medicare and private nongroup coverage raised the
uninsurance rate over the entire period. The uninsurance rate among
persons above 400 percent of poverty also rose. This reflected declines in
both employer and private nongroup coverage. It is
interesting that the uninsurance rate rose for each of the three income
groups. It only remained constant overall because so many persons moved up
the income distribution, where the likelihood of being uninsured was
lower. A related point is that all of the growth in the uninsured over the
period occurred among the nonpoor. The number of uninsured persons below
200 percent of poverty actually fell by 1.84 million, primarily because
there were fewer low-income Americans. How Many Uninsured People Will There Be In A
Recession? This analysis
examines a period of great prosperity. As of this writing, the nation was
in a recession, and there is concern that the number of uninsured persons
will rise sharply. One study has estimated that 2.2 million more persons
became uninsured in 2001.9
No one knows how high the unemployment rate will go; thus, it is difficult
to predict how much the number of uninsured Americans will increase. This paper
has shown the important role played by the growth in employer coverage
during the late 1990s. Much of this growth has been attributable to
increased rates of coverage among low-income Americans coupled with income
expansion. These could be reversed in an economic slowdown. Firms facing
reduced demand for their products might drop health insurance. Others
might increase employee contributions, causing some employees to drop
their coverage. Premiums have risen sharply in the past few years, which
could exacerbate the effect of an economic slowdown. As we have
seen, employer coverage has been substituted for other forms of coverage
over the past several years. This will likely be reversed, although how
much so will bear heavily on how much the uninsurance rate will grow.
Medicaid coverage is likely to increase as more become eligible because of
falling incomes. Medicaid enrollment has risen in prior recessions.10 Whether
Medicaid and other state programs will respond as they have in the past is
unknown. State budget shortfalls are large and may keep states from
allowing enrollment to expand. In the past several years employer coverage
also seems to have substituted for private nongroup coverage. Whether
persons losing employer coverage will be able to buy increasingly costly
individual coverage is also unknown. How these scenarios play out will
eventually determine the actual increase in the number of uninsured
Americans in the coming years. NOTES 1. U.S.
Census Bureau, Health Insurance Coverage: 2000 (Washington: US Government
Printing Office, September 2001); and R. Pear, “Number of Uninsured
Drops for Second Year,” New York Times, 28 September 2001 2. We
removed the elderly (age 65 and older) and active-duty military from the
CPS analysis. Military health includes military retirees and dependents
receiving health care from the Uniformed Services, TRICARE, the Civilian
Health and Medical Program of the Uniformed Services (CHAMPUS), VA Health
Care, or CHAMPVA. 3. J.
Holahan and J. Kim, “Why Does the Number of Uninsured Americans Continue
to Grow?” Health Affairs (July/Aug 2000): 188–196. 4. J.
Holahan, Why Did the Number of Uninsured Fall in 1999? (Washington: Kaiser
Commission on Medicaid and the Uninsured, January 2001). 5. S.
Zuckerman and M.B. Pohl, “Verifying Health Insurance Coverage in the
CPS: Impact on Estimates of the Uninsured over Time,” Health Policy
Brief (Washington: Urban Institute, forthcoming). 6. The
hierarchy is as follows: insurance through an individual’s own employer
or another’s group plan, including coverage outside the household;
Medicaid, SCHIP, or other state-funded health coverage; federally funded
health coverage through military and veterans’ coverage and Medicare;
coverage through private insurance that is not employer or group
insurance; and uninsured. For verified CPS data, those classified as
uninsured responded to the verification questions as being uninsured; for
unverified CPS data, this is a residual category for those who did not
report having any of the other types of insurance coverage over the course
of the year. 7. Changes
in income distribution that we report are not affected by the use of
health insurance units. 8. V.
Smith and E. Ellis, Medicaid Budgets in Stress: Survey Findings for State
Fiscal Year 2000, 2001, and 2002 (Washington: Kaiser Commission on
Medicaid and the Uninsured, October 2001). 9.
Covering the Uninsured, “Two Million Americans Lost Their Health
Insurance in 2001; Largest One-Year Increase in Nearly a Decade” (Press
release prepared by Families USA for a Robert Wood Johnson
Foundation–sponsored partnership, Covering the Uninsured, 12 February
2002). The figure of 2.2 million more uninsured persons in 2001 is
calculated from Bureau of Labor Statistics data using US Census Bureau
methodology (R.L. Bennefield, Who Loses Coverage and for How Long?
Dynamics of Economic Well-Being: Health Insurance, 1993–1995 [Suitland,
Md.: US Census Bureau, Economics and Statistics Administration, August
1998]) and is based on work from researchers at the Henry J. Kaiser Family
Foundation and Massachusetts Institute of Technology. 10. Bowen Garrett, Urban Institute, unpublished estimates, 2001; and J. Holahan and B. Garrett, “Rising Unemployment and Medicaid,” Health Policy Online, no. 1 (Washington: Urban Institute, 16 October 2001). John Holahan is director of the Health Policy Center at the Urban Institute in Washington, D.C. Mary Beth Pohl is a research assistant there. FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Action on Aging distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.
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