Agency for Healthcare 

Medical Expenditure Panel Survey Research and Quality 

STATISTICAL BRIEF #98 

September 2005 

Employer-Sponsored Health Insurance 

Costs, Offer Rates, and Take-Up Rates Highlights 

for Small Employers in the Private ¢ Costs to small private 

sector employers who Sector, by Industry Classification, 2000	 offered employer-sponand 2003	 sored health insurance to 

their employees as a 

John Sommers and Richard Keach	 percentage of their total 

payroll costs rose from 6.0 

percent in 2000 to 7.5 

Introduction	 percent in 2003, with 

substantial variations by 

In 2000, according to the Insurance Component of the Medical industry classification. 

Expenditure Panel Survey (MEPS-IC), the cost for employer- ¢ Between 2000 and 2003, sponsored health insurance for 64.3 million active enrollees in the the percentage of employ- private sector in the United States was $295 billion. This was 

approximately $4,591 per active enrollee with any type of coverage: ees who worked for small 

single, family, or one-plus-one. This cost was shared by employers private sector employers 

who offered health insurance and the active enrollees. In 2003, the who offered health insursame cost for 60.7 million active enrollees in the private sector was ance dropped from 67.8 

$6,095 per active enrollee, a total of $370 billion. The costs per percent to 61.6 percent, 

enrollee had increased 32 percent. This rate was much higher than with variations by industry 

the approximately 7 percent increase in the Consumer Price Index classification. 

for All Urban Consumers for the same time period.1 

¢ The total employee 

Increases in the cost of health insurance are a large concern for contributions per payroll of 

small private sector employers (those with fewer than 50 enrolled employees at 

employees). According to the 2002 National Survey of Small small private sector 

Businesses,2 67 percent of the executives surveyed were dissatisfied employers who offered 

with the costs of employer-sponsored health care and felt that rising health insurance rose from 

costs would lead to disruptions in coverage. 2.3 percent in 2000 to 3.1 

percent in 2003, with 

This Statistical Brief examines health insurance costs for small variations by industry 

private sector employers and their enrolled employees as a classification. 

percentage of payroll, by industry, for the years 2000 and 2003. The ¢ The percentage of brief also shows the percentage of employees who worked at small employees of small private private sector employers where health insurance was offered in 

those years and the percentage of these employees who enrolled sector firms who worked 

during those years. These offer and participation rates for small where health insurance 

private sector employers are a possible indication of employer and was offered and enrolled in 

employee reactions to the large changes in costs between 2000 and employer-sponsored 

health insurance did not 2003. change significantly between 2000 and 2003. All differences between estimates discussed in the text are 

statistically significant at the 0.05 level unless otherwise noted. 

1 Bureau of Labor Statistics Web site: http://www.bls.gov/data/
 2 Kaiser Family Foundation. National Survey of Small Businesses. April 2002. Menlo Park, CA, Publication Number 200204022.

Findings 

Small private sector employers who offered health insurance spent an average of 6 cents per dollar of 

payroll on employee health insurance costs in 2000 (figure 1). By 2003, this cost rose to 7.5 cents per 

dollar of payroll for small employers who offered health insurance, a 25 percent increase. The largest 

real gain in costs was in the Utilities and Transportation industry, whose costs rose from 5.0 to 8.9 

cents per dollar of payroll, an amount higher than the national rate. During the same time period, the 

Financial Services and Real Estate industry showed a smaller than average increase. 

Between 2000 and 2003, the percentage of employees in small firms who worked where health 

insurance was offered dropped from 67.8 percent to 61.6 percent (figure 2). During that time frame, the 

offer rate for small businesses in most industries showed a significant decline. The Utilities and 

Transportation industry showed a decline that was higher than average. Only Wholesale Trade and 

Professional Services did not show significant declines in offer rates by small businesses. 

Between 2000 and 2003, the total contribution by enrolled employees at small private sector firms rose 

from 2.3 to 3.1 percent of the total average payroll for enrolled employees (figure 3). This percentage of 

payroll rose in all industries except Utilities and Transportation and Financial Services and Real Estate, 

where there was no significant change. 

The percentage of employees who worked for small private sector employers who offered health 

insurance and enrolled in their employer’s plan changed from 62.1 to 60.7 percent, respectively, 

between 2000 and 2003 (figure 4). This reduction was not statistically significant. 

Data Source 

This Statistical Brief summarizes data from the 2001 and 2003 MEPS-IC. The data are available on the 

MEPS Web site (www.meps.ahrq.gov) or have been produced using special computation runs on the 

confidential MEPS-IC data available at the U.S. Census Bureau. 

Definitions 

In this Statistical Brief, an employer is defined as a private sector firm. A firm is defined as a business 

entity that controls one or more business establishments or locations. Consequently, an employer can 

have multiple work locations. Only small employers with fewer than 50 employees across all their 

locations were included in this analysis. 

The classification by industry is based upon the North American Industrial Classification System. 

All payroll and contributions were annualized for this paper. 

Payroll includes all forms of compensation, such as salaries, wages, commissions, dismissal pay, 

bonuses, and employee contributions to pension plans. Payroll excludes fringe benefits. This definition 

is the same as that used by the Internal Revenue Service on Form 941. 

Total payroll at firms that offer health insurance was estimated using the weighted sum of total annual 

payroll for establishments (locations) in the sample. 

Total payroll per enrolled employee was obtained by using average payroll per employee reported for 

each establishment in the sample that offered health insurance. This value was multiplied by the 

number of enrolled employees at the establishment. The weighted sum of these values was taken as 

an estimate of the total payroll for enrolled employees. 

Total contributions for enrollees by employers where health insurance is offered was estimated by 

taking the employer portion of each type of plan (single, one-plus-one, and family) and its associated 

premiums at the sample establishment and multiplying by the associated plan enrollments. These 

values were summed over all plans and types of enrollment at the establishment, and the weighted sum 

of these values across all establishments was used as the estimate of total employer contributions. 

Total employee contributions were calculated with a method parallel to that used for employer 

contributions. 
About MEPS-IC 

MEPS-IC is a survey of business establishments and governments that collects information on 

employer-sponsored health insurance, such as whether insurance is offered, enrollments, types of 

plans, and premiums. The survey is conducted annually by the U.S. Bureau of the Census under the 

sponsorship of the Agency for Healthcare Research and Quality. The yearly response rate has 

averaged 78 percent for in-scope sample units. Approximately 4 percent of the original sample has 

been out-of-scope in a typical year. A total sample of 42,000 establishments was selected for the 2003 

survey, prior to accounting for losses due to nonresponse and out-of-scope cases. 

For more information on this survey, see MEPS Methodology Reports 6, 8, and 10 under MEPS 

publications at http://www.meps.ahrq.gov/mepsweb/data_stats/publications.jsp and the MEPS-IC 

Technical Appendix at http://www.meps.ahrq.gov/mepsweb/survey_comp/ic_technical_notes.jsp. 

Suggested Citation 

Sommers, J. (AHRQ) and Keach, R. (Census Bureau). Employer-Sponsored Health Insurance Costs, 

Offer Rates, and Take-Up Rates for Small Employers in the Private Sector, by Industry Classification, 

2000 and 2003. Statistical Brief #98. September 2005. Agency for Healthcare Research and Quality, 

Rockville, Md.http://meps.ahrq.gov/mepsweb/data_files/publications/st98/stat98.pdf 

� � �

AHRQ welcomes questions and comments from readers of this publication who are interested in 

obtaining more information about access, cost, use, financing, and quality of health care in the United 

States. We also invite you to tell us how you are using this Statistical Brief and other MEPS data and 

tools and to share suggestions on how MEPS products might be enhanced to further meet your needs. 

Please e-mail us at mepspd@ahrq.gov or send a letter to the address below: 

Steven B. Cohen, PhD 

Director 

Center for Financing, Access, and Cost Trends 

Agency for Healthcare Research and Quality 

540 Gaither Road 

Rockville, MD 20850 
Source: Center for Financing, Access, and Cost Trends, AHRQ, Insurance Component of the Medical Expenditure Panel Survey, 2000 and 2003

Figure 1. Employer health insurance costs as a percentage of all

payroll in private sector firms with fewer than 50 employees that 

offer health insurance, by industry, 2000 and 2003

6.0

7.4 7.1

6.2

6.7

5.0

7.0

4.6

6.2

7.5

8.9

6.9

8.2

6.3

8.3

8.9

8.3

9.1

0

1

2

3

4

5

6

7

8

9

10

M ining &

M anuf act uring

C onst ruct ion U t ilit ies &

Transport at ion

W holesale

Trade

Financial

Services & Real

Estate

R et ail Prof essional

Services

 Ot her 

Services

U.S.

2000 2003

Percent

Source: Center for Financing, Access, and Cost Trends, AHRQ, Insurance Component of the Medical Expenditure Panel Survey, 2000 and 2003

Figure 2. Percentage of private sector employees in firms with 

fewer than 50 employees who work where health insurance is 

offered, by industry, 2000 and 2003

67.8

54.3

66.3

77.3 81.0 76.8

86.3

73.5

69.5

61.6

49.4

70.3

54.9

69.5

78.1

61.5 63.9

76.8

0

10

20

30

40

50

60

70

80

90

100

M ining &

M anuf act uring

Const ruct ion U t ilit ies &

Transport at ion

W holesale

Trade

Financial

Services & Real

Estate

R et ail Prof essional

Services

 Ot her 

Services

U.S.

2000 2003

Percent
Source: Center for Financing, Access, and Cost Trends, AHRQ, Insurance Component of the Medical Expenditure Panel Survey, 2000 and 2003

Figure 3. Employee insurance contributions as percentage of 

estimated total payroll for enrollees in employer-sponsored health 

insurance at private sector firms with fewer than 50 employees, 

by industry, 2000 and 2003

2.9

1.7

2.4

3.2

1.7 1.8

4.0

3.6

2.3

3.2

3.6

2.8 2.9

1.6

5.5

2.7

4.2

3.1

0

1

2

3

4

5

6

M ining &

M anuf act uring

C onst ruct ion Ut ilit ies &

Transport at ion

W holesale

Trade

Financial

Services & Real

Estate

Ret ail Prof essional

Services

 Ot her 

Services

U.S.

2000 2003

Percent

Source: Center for Financing, Access, and Cost Trends, AHRQ, Insurance Component of the Medical Expenditure Panel Survey, 2000 and 2003

Figure 4. Percentage of private sector employees who enrolled 

in health insurance in firms with fewer than 50 employees that 

offered health insurance, by industry, 2000 and 2003

66.5 68.5

72.6

53.2

74.5 74.4

59.3

43.8

62.1

71.6

65.7 64.4

71.2 69.5

55.2

64.7

45.8

60.7

0

10

20

30

40

50

60

70

80

M ining &

M anuf act uring

C onst ruct ion U t ilit ies &

Transport at ion

W holesale

Trade

Financial

Services & Real

Estate

R et ail Prof essional

Services

 Ot her 

Services

U.S.

2000 2003

Percent