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New Study Highlights Major Disparities in Employer-Sponsored Insurance

St. Louis, Dec. 18 - - A new study released today by the Missouri Foundation for Health (MFH) shows that companies providing health insurance to the spouses of their employees are assuming additional health care costs of more than $46 billion nationally, $891 million for companies in the state of Missouri.

"This study not only identifies major disparities in our system of employer-sponsored health insurance coverage, but it also shows us that there are real consequences if these disparities continue unaddressed," said Leslie Reed, MFH Vice President for Health Policy. "Smaller firms are having more and more difficulty providing insurance to their employees due to its increasing cost. Correspondingly, businesses able to provide insurance to their employees and their employees' spouses face significant challenges. As health insurance costs increase and the number of people absorbed into their plans grows, these employers may be forced to cut jobs or cut back on the health insurance benefits they are currently able to offer.

"Under either scenario, these inequities in the ESI system will continue to add to the number of uninsured or underinsured Americans and continue the spiral of increased cost and decreased coverage."

ESI Coverage and Disparities
The study, titled "Health Insurance Coverage of Dual-Income Families: The Free-Rider Effect and the Cost to Employers," examines the distribution of costs associated with employer-sponsored insurance (ESI) among dual-income families and provides information for the United States as well as the state of Missouri. It includes new 2006 data and builds on existing knowledge to offer significant new insights into ESI coverage, including:

* The decline in the percentage of individuals covered by ESI has continued over the last five years, falling from 59 percent to just 53 percent.
* Large employers are carrying extra health insurance costs because many small employers have either been priced out of the health insurance system, or cannot offer coverage at similarly affordable rates as large employers.
* In 2006, employers providing health insurance to their employees' working spouses are assuming additional health care costs of more than $46 billion nationally and $891 million in Missouri.

The "Free-Rider" Effect
Employers that do not provide insurance to their own workers have been characterized as "free-riders" because their workers are receiving health insurance through their spouses' employers. The study examines this "free-rider" effect in detail, looking at its financial impact as well as delving into which industries contain the greatest concentration of free-riders. The relation between company size and prevalence of free-riding is also examined. Among the findings about the "free-rider" effect:

* Nationally, there were nearly 31 million families (61.7 million adults) where both adults were employed during the year. In Missouri, almost 682,000 families were dual-income.
* Of these families, 55 percent in the U.S. (34.1 million workers in 17.1 million families) and 51 percent in Missouri (more than 692,000 workers in 346,000 families) have ESI coverage through one spouse's policy.
* The incremental cost to employers covering a worker from a "free-riding" firm is $2,713 per employee in the U.S. and $2,564 in Missouri when both employers are covered under one spouse's policy.
* Looked at another way, for each employee covered by their spouse's policy, the "free-riding" U.S. employer would have spent $2,886 in 2006 had they provided health insurance to their own workers. In Missouri "free-riding" employers saved $2,764 per employee by not contributing to the coverage employees received through their spouse's insurance policy.
* Both nationally and in Missouri, the retail, agricultural, fishing, and forestry industries have the highest concentration of "free-riders."
* Both nationally and in Missouri, "free-riding" employers are most prevalent among the smallest firms - those with fewer than 10 employees. In fact, the concentration of "free-riding" employers generally decreases as firm size increases.

"This study points to the need for a more equitable method for distributing costs and benefits within the employer-sponsored insurance system," said Reed. "We hope that this study prompts businesses, legislators, and policy makers to recognize these disparities and work to develop broader system solutions to eliminate them."

The study was conducted by Dr. Ken Thorpe of the Emory University School of Public Health. The full report and the summary are available on the MFH web site at http://www.mffh.org/policy_showme.html.

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