United States General Accounting Office

GAO Report to the Ranking Minority Member,

Subcommittee on Children and Families,

Committee on Labor and Human

Resources, U.S. Senate

February 1997 EMPLOYMENT-BASED

HEALTH INSURANCE

Costs Increase and Family

Coverage Decreases

GAO/HEHS-97-35

GAO United States

General Accounting Office

Washington, D.C. 20548

Health, Education, and

Human Services Division

B-271082 

February 24, 1997

The Honorable Christopher J. Dodd

Ranking Minority Member

Subcommittee on Children and Families

Committee on Labor and Human Resources

United States Senate

Dear Senator Dodd:

Nearly two-thirds of Americans under 65 years old—some 150 million

people—have employment-based private health insurance. Although many

employers remain committed to providing employee and family coverage,

the percentage of people with private coverage is declining. At the same

time, the percentage of Americans who are uninsured or rely on

Medicaid—particularly children—continues to increase. The effect of

being uninsured on the health of families can be significant. For example,

uninsured children are less likely than insured children to receive primary

care, immunizations, and treatment for injuries. The lack of such care can

lead to health conditions and disabilities that require more costly and

long-term care.

Concerned about the decline in employment-based health insurance

coverage, you asked us to (1) identify any recent trends in

employment-based private health insurance, particularly for family

coverage; (2) determine any corresponding changes in the number of

adults and children with private insurance coverage as dependents; and

(3) identify the potential effect of these changes, if any, on public costs for

health care coverage. To answer these questions, we analyzed surveys of

health insurance coverage conducted by the Department of Labor (DOL)

and by private benefits consultants, such as KPMG Peat Marwick and

Hewitt Associates. We also analyzed the Bureau of the Census’ Current

Population Surveys (CPS) on health insurance coverage for 1989, 1991,

1993, and 1995. In addition, we discussed trends with experts, insurance

company executives, and benefits consultants to determine how employer

practices may have changed in the past several years. We also reviewed

research reports on private insurance and the health insurance

marketplace.

Because more limited information is available on benefit practices at small

firms (fewer than 100 employees), our report primarily focuses on large

firms (100 or more employees) and major firms (over 1,000 employees).

Page 1 GAO/HEHS-97-35 Family Health Insurance
B-271082 

For this report, family generally refers to a group of people whom insurers

would consider a family for the purposes of health insurance

coverage—typically adults related by marriage, parents, and their children

under 18 years old.1

 (See app. I for more details of our methodology.)

Results in Brief Eroding employer financial support for providing health insurance to

employees’ families has contributed to the overall decline in private health

insurance coverage.2

 Each year between the late 1980s and 1994, increases

in employers’ costs to provide health insurance to their employees and

their employees’ families outpaced inflation—with cost growth of

18 percent one year. As health insurance reached 10 percent of employees’

payroll costs, many employers began to reconsider the amount of support

they would provide to employees, particularly for family coverage.

Acquiring or maintaining health insurance has become more difficult for

some families because of changes that some employers made to their

firms’ health coverage. Some employers—particularly smaller

employers—dropped coverage altogether. In 1993, over 29 million

employees—almost one-fourth of the workforce—were employed by firms

that did not offer group health insurance for employees’ families. Most

employers continued to offer coverage, but many raised employees’

premium contributions significantly—especially for family coverage. In

1993, 16 percent of employees in large private firms paid $150 or more per

month for family health insurance premiums; 36 percent of state and local

government employees paid as much in 1992. Some employers have used

other mechanisms, such as financial incentives, that could discourage

employees from two-worker families from purchasing family coverage

from them.

As these changes occurred, the percentage of Americans under 65 years

old with private health insurance coverage decreased from 75 percent in

1989 to about 71 percent in 1995. Of this general decline, about 70 to 90

1

Other adults who could be included as adult dependents in our CPS analysis include young unmarried

adults under 19 years old or in college who are covered through their parents’ health insurance

policies and married spouses who have separated from the primary family policyholder. In addition,

some employers extend health insurance coverage and other benefits to unmarried partners of

employees as dependents—either gays or unmarried heterosexuals—and they could also be included

as adult dependents.

2

Most people under 65 years old with private coverage obtain their health insurance through

employment-based plans. Private insurance purchased directly by individuals covers about 5 percent

of the population under 65 years old as their only source of health insurance coverage. For more

information on the structure of the private market for individual coverage, see Private Health

Insurance: Millions Relying on the Individual Market Face Cost and Coverage Trade-Offs

(GAO/HEHS-97-8, Nov. 25, 1996).

Page 2 GAO/HEHS-97-35 Family Health Insurance
B-271082 

percent was due to fewer working-age adults and children being covered

as dependents. Between 1989 and 1995, the percentage of working-age

adults (18 to 64 years old) with private insurance coverage decreased from

76 percent to 73 percent. If the same percentage of working-age adults had

been covered in 1995 as in 1989, about 5 million more adults would have

had private insurance. However, children experienced the greatest loss of

private coverage. Over these 6 years, the percentage of children under 18

years old with private health insurance decreased from more than 73

percent to 66 percent. If private coverage levels had not decreased, about

5 million more children would have private insurance.

Declines in employment-based dependent coverage can increase the

number of uninsured Americans and shift a greater burden for health care

onto public payers. Between 1994 and 1996, health insurance premium

costs have been relatively stable, which may help slow the erosion of

private coverage. However, unless the decline in employment-based

insurance coverage abates, public payers could face increased costs for

health care—either for uncompensated care or for public insurance.

Background Support for employment-based health insurance by employers contributes

to the health and financial security of employees and their families. U.S.

employers traditionally have provided private group health insurance as an

employment benefit for their employees and their employees’ spouses and

children. Beginning with World War II—when wages were frozen and

employers wanted to attract good employees—employment-based

insurance became a more common fringe benefit. Today, private health

insurance offered through employment is the main source of health

insurance coverage in the United States—in 1995, more than 90 percent of

people under 65 years old with private insurance—150 million

people—were insured through their employment. The majority of working

adults 18 to 64 years old with private insurance (74 percent) work for

private companies, but 17 percent work for the federal, state, or local

governments. Most of the remainder are self-employed.

Employment-based insurance—where employers pay part or all of the

costs—can be advantageous for employees and many employers.3

 For

employees, such health insurance is generally more affordable because

they receive group rates for coverage, which are typically lower than those

3

For employers of low-wage or part-time employees, the advantage for the employer is not as great.

When employers consider salary and benefit costs together as an employee’s total compensation,

benefits represent a much larger share of a low-wage employee’s total compensation than a high-wage

employee’s total compensation.

Page 3 GAO/HEHS-97-35 Family Health Insurance
B-271082 

for individual coverage. In addition, employees do not pay taxes on

contributions that their employers make toward their employment-based

coverage—an advantage employees would lose if they were to receive

additional cash income and to purchase individual coverage. For

employers, offering affordable health insurance is an attractive benefit that

helps them promote the health and productivity of their work force and

remain competitive in recruiting new employees. Employers’ contributions

to employee benefits are deductible from their companies’ gross income

and thus reduce their companies’ tax liability.4

 In the United States, the

system of private health insurance based on employment is entirely

voluntary. Employers are not required to provide insurance, nor are

employees required to purchase it.

In addition to private insurance, the federal, state, and some local

governments provide public funding for health insurance, primarily

through Medicaid, Medicare, state health insurance plans, and the Civilian

Health and Medical Program of the Uniformed Services (CHAMPUS).

Medicaid is the largest public source of health insurance coverage for

children and working-age adults, covering 29 million people under 65 years

old in 1995. Enacted in 1965, Medicaid was designed to provide health care

coverage for populations whose incomes and resources were insufficient

to meet the costs of needed medical care, including adults and children

receiving Aid to Families With Dependent Children (AFDC) and aged, blind,

or permanently and totally disabled individuals. Although Medicaid has

expanded eligibility beyond these groups, it still limits eligibility to specific

populations of lower-income adults and children. Medicare provides

health care coverage for over 37 million people—most of them people 65

years old or older. Medicare also covers people entitled to disability

benefits for 24 months or more, people with end-stage renal disease

requiring dialysis or kidney transplant, and certain others who elect to buy

into the program through premium payments. CHAMPUS provides medical

care for active-duty or retired military families, as well as to the immediate

families of deceased active-duty or retired military personnel.

Although these private and public health insurance systems provide

coverage for many Americans, many remain uninsured. In 1995, more than

40 million people under 65 years old had no health insurance for the entire

year, including many employees and their families.

4

However, employers would get the same deduction if they paid any other legitimate business expense,

such as cash wages.

Page 4 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Employers

Reexamined Their

Role as Premium

Costs Increased

From the late 1980s to the early 1994, the cost of health insurance

premiums5

 rose rapidly, especially for family coverage. With these

increases in costs, many employers began to reexamine their role and the

benefits they offered to employees, and some employers began to question

the extent of their responsibility to finance coverage for families.

In the late 1980s, the cost of employment-based health insurance

premiums significantly outpaced inflation. Between 1988 and 1989,

employer costs for health insurance rose 18 percent in one year. By

contrast, general inflation was under 5 percent. Health insurance premium

costs began to stabilize recently. (See fig. 1.) However, health insurance

continues to be a major portion of employers’ total compensation to

employees—7.3 percent of payroll costs in 1993,compared with 4.4 percent

in 1980.

5

Many large companies self-insure, so that while their employees generally contribute to the cost of

their health coverage, they are not paying an insurance premium. However, for simplicity, we will refer

to all employee contributions for their health coverage that function similar to a premium payment as

premiums.

Page 5 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Figure 1: Increases in Health Insurance

Premiums, 1991 to 1996

1991 1992 1993 1994 1995 1996

0

2

4

6

8

10

12

14

11.5

10.9

8.0

4.8

2.1

0.5

Percent

Source: KPMG Peat Marwick, Health Benefits in 1996. This was a survey of about 1,000 randomly

selected public and private employers with 200 or more employees.

Between 1989 and 1996, cost increases for family premiums were 13 to

23 percent higher than cost increases for employee-only premiums,

depending on the type of health plan. For example, since 1989, premium

costs for health maintenance organization (HMO)6

 coverage for families

increased 59 percent, while premium costs for employee-only HMO

coverage increased only 36 percent. (See fig. 2 and table II.1)

6

HMOs are organized health care systems that are responsible for both the financing and delivery of a

broad range of comprehensive health services to an enrolled population.

Page 6 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Figure 2: Percent Increases in Health

Insurance Premiums for

Employee-Only and Family Coverage,

1989-96

Conventional HMO PPO

0

20

40

60

80

46

35

52

68

58

65

Employee-Only Coverage

Family Coverage

Percent

Source: Health Insurance Association of America and KPMG Peat Marwick. The Health Insurance

Association of America survey was of about 2,600 public and private employers with at least 2

employees (for 1989) and the KPMG Peat Marwick surveys were of about 1,000 randomly selected

public and private employers with 200 or more employees (all subsequent years).

Some Employers Question

Their Role in Providing

Family Coverage

With the surge in health insurance premium costs, some companies began

to reevaluate their obligation to provide coverage to employees and

especially their dependents. A recent survey of 601 businesses found that

40 percent would prefer to pay 50 percent or less of employee insurance

premiums and only a minority believed that they should continue to pay

the full cost of employee-only premiums. Of those who thought businesses

should be required or encouraged to provide insurance to employees’

families, nearly half agreed that employers should contribute an even

smaller share for family coverage than employee coverage. According to

the study, employers viewed their role in providing coverage to employees

and their dependents as diminishing.7

7

Jack A. Meyer, Diane H. Naughton, and Michael J. Perry, Assessing Business Attitudes on Health Care

(Washington, D.C.: Economic and Social Research Institute, 1996).

Page 7 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Some firms—particularly those with fewer than 25 employees or that

primarily employ low-wage employees—do not offer health insurance. In a

1994 survey of over 22,000 establishments in 10 states, 42 percent did not

offer health insurance benefits; most were establishments with 1 to 4

employees or with a higher-than-average percentage of low-wage or

part-time employees.8

Historically, large employers and certain types of businesses—such as

manufacturing and other highly unionized industries—have provided

insurance packages with generous benefits for employees and their

families. Yet by doing so, these large employers in essence subsidize other

employers who do not cover their employees or offer a less

comprehensive package.9

 Offering an attractive and costly benefits

package can put the firm at a competitive disadvantage with firms who do

not pay as much for benefits, and do not attract their employees’ families

to enroll.

According to several benefits consultants, some employers no longer want

to subsidize families to the extent that they have because they prefer to

more closely link total employee compensation to work contribution.

Employers that provide generous family health insurance packages, in

effect, pay employees with family coverage more than they pay employees

without family coverage—considering the value of benefits. Some

employers are concerned that this is not equitable. For example, a

company that pays 100 percent of the cost of employee health insurance

premiums could provide a benefit that is worth, on average, more than

twice as much to the employee who chooses family coverage over

employee-only coverage—$5,000 versus $2,000.

8

Joel Cantor, Stephen Long, and M. Susan Marquis, “Private Employment-Based Health Insurance in

Ten States,” Health Affairs, Vol. 14, No. 2 (1995), pp. 199-211.

9

Deborah Chollet, “Employer-based Health Insurance in a Changing Work Force,” Health Affairs, Vol.

13, No. 1 (1994), pp. 315-26.

Page 8 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Employers Raise

Employees’

Contributions to

Premiums, Especially

for Families, and

Discourage Family

Coverage in Other

Ways

Employers have responded to the increases in health insurance costs in

several ways. Some employers stopped offering health insurance coverage

altogether. Many who retained coverage have switched to managed care

plans in an attempt to control premium costs. Many employers also

increased the amounts employees had to pay toward their premiums, with

growth in premium contributions by employees for family coverage

outstripping growth in premium contributions for employee-only

coverage. Some employers used other strategies to encourage employees

not to choose family health insurance coverage, including paying

incentives to those who choose employee-only coverage.

These changes can provide significant savings for companies. A benefits

consultant reported to us that certain companies have saved 15 to

20 percent in costs associated with their health plans by increasing family

health insurance premium costs or by otherwise discouraging employees

from choosing family coverage.

To Offset Increases, Some

Employers Dropped

Coverage—Others

Switched to Managed Care

Plans

A small percentage of employees may have lost coverage because their

employer dropped health insurance or because they began working for a

firm that did not offer coverage. Overall, 78.4 percent of employees

reported that their employers sponsored health insurance plans in 1993,

compared with 79.3 percent in 1988.10 Smaller firms were more likely to

stop offering health insurance—13 percent fewer people working in firms

with under 10 employees reported that their employers’ offered coverage

in 1993, compared to 1988. Larger firms—under 250 employees—also

dropped coverage, but at much lower rates.

By 1993, more than 29 million employees—almost one-fourth of the

workforce—could not get employment-based health insurance for their

families. Eighteen percent of these employees worked for firms that did

not offer health insurance; about 5 percent worked for firms that offered

employee-only health insurance but no coverage for other family

members.11

Other employers reacted to health insurance premium increases by

encouraging their employees to enroll in managed care. From 1984 to

10The question asked if employers’ had a plan, whether or not the employee was eligible to participate.

See Employment-Based Health Benefits: Analysis of the April 1993 Current Population Survey,

Employee Benefit Research Institute Special Report SR-24 and Issue Brief No. 152 (Washington, D.C.:

Employee Benefit Research Institute, 1994).

11Employment-Based Health Benefits: Analysis of the April 1993 Current Population Survey.

Page 9 GAO/HEHS-97-35 Family Health Insurance
B-271082 

1993, the number of employees in large firms who were enrolled in

managed care plans, such as HMOs, increased from 5 percent to 50 percent.

HMO premiums were generally lower than premiums for fee-for-service

plans, so employers could lower premium costs by switching the types of

plans they offered. This is coupled with fewer employers offering

indemnity plans. KPMG Peat Marwick reported that 89 percent of

employees with employment-based coverage could choose a conventional

indemnity plan in 1989; that percentage dropped to 57 percent by 1996.

Employers Increased

Employees’ Contributions

for Health Insurance,

Particularly for Family

Coverage

To offset increases in health insurance costs, some employers opted to

have employees share in the costs of their insurance premium or increased

their share of these costs. According to DOL, less than one-half the

employees in large firms contributed to employee-only health insurance

premiums in 1988. By 1993, more than 60 percent did.12 In addition, more

than 75 percent of employers required employees to share in the costs of

family premiums in 1993. Employees’ share of premium costs are higher

for family coverage—30 percent for family coverage in 1996, compared to

22 percent for employee-only coverage, according to Peat Marwick. Since

1989, employees’ share of premiums increased more rapidly for

employee-only coverage, as fewer firms offered coverage at no

cost—which is more common for employee-only coverage. Hewitt

Associates also found that fewer major employers provided health

insurance plans at no cost to their employees or employees’ families in

1995 than the same companies did in 1990. (See fig. 3.)

12DOL surveys medium and large establishments (with 100 or more employees) and small

establishments (fewer than 100 employees) separately every other year. References in this report to

DOL’s information on large firms includes DOL’s surveys of medium and large establishments only.

Page 10 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Figure 3: Percent of Major Firms

Offering Health Insurance With No

Employee Premium Contribution, 1990

and 1995

Single Indemnity Family Indemnity Single PPO Family PPO

0

5

10

15

20

25

30

35

27

14

30

15

7

5

11

6

1990

1995

Percent

Notes: Major firms have 1,000 or more employees. Preferred provider organization (PPO) plans

provide financial incentives for patients to get care from a selected network of doctors and

hospitals by charging additional fees if patients go to providers outside the preferred network.

Indemnity plans refer to traditional insurance plans, which reimburse providers and patients on a

fee-for-service basis. HMOs require patients to have services delivered by providers affiliated

with them, except for emergency treatment. HMOs also typically require patients to select a

primary care physician to coordinate the patient’s care, especially for services involving referrals

to specialists and hospital care. Point-of-service (POS) plans are similar to PPO plans, in that they

encourage enrollees to use a selected network of doctors and hospitals, but allow patients to see

providers out of the network if the patient pays additional fees for that care. Like HMOs, POS

plans have enrollees select a primary care physician who coordinates care for the patient,

including care requiring referrals to specialists. The Hewitt Associates report did not provide

comparative information about HMOs and POS-type plans for 1990—only information for 1995.

Source: Hewitt Associates, Salaried Employee Benefits Provided by Major U.S. Employers in 1990

and 1995: A Comparison Study, 1996.

Employees’ average monthly contribution also increased significantly

between 1988 and 1993. Increases generally were greater for employees

with family coverage than for those with employee-only coverage.

According to DOL, in large firms average monthly contributions for family

coverage increased 79 percent, compared to 64 percent for employee-only

coverage between 1988 and 1993. (See table 1.)

Page 11 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Table 1: Average Monthly Premium

Contributions Paid by Employees in

Large Firms, 1988, 1989, 1991, and

1993a

Average monthly

contributionb 1988 1989 1991 1993

Percent

increase

1988-93

Employee-only

coverage $19 $25 $27 $32 64

Family coverage 60 72 97 107 79

Note: Large firms have 100 or more employees. Percent increase may not calculate exactly from

the premium costs in this table due to rounding.

aFull-time employees only in medium and large establishments (100 or more employees). DOL

also surveys small establishments (fewer than 100 employees).

bBased only on those employees who contribute to the cost of their employment-based premium.

Source: Bureau of Labor Statistics.

Similarly, a Hewitt Associates study comparing benefits offered by the

same set of major U.S. firms in 1990 and 1995 showed that for given types

of health insurance plans, employees’ median monthly premium

contributions increased more for family than for employee-only coverage.

(See fig. 4.)

Page 12 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Figure 4: Median Monthly Premium

Contributions by Employees for

Indemnity and PPO Plans in Major

Firms 1990 and 1995

Single Indemnity Family Indemnity Single PPO Family PPO

0

20

40

60

80

100

19

55

24

63

28

90

27

85

1990

1995

Median Monthly Premium Contributions (in Dollars)

Source: Hewitt Associates, Salaried Employee Benefits Provided by Major U.S. Employers in 1990

and 1995: A Comparison Study, 1996.

Health Insurance Is

Expensive for Some

Families

For some families, the overall rise in health insurance costs has made the

current price of employment-based health insurance difficult to afford. DOL

reported that in 1993, 16 percent of employees paid $150 or more per

month for family health insurance premiums. The percentage of

employees in state and local governments who spend $150 or more per

month for family health insurance is even greater than in private industry.

In 1992, 36 percent of state and local employees paid $150 or more per

month for family health insurance. In addition, state and local employees’

average monthly premium contribution for families was $139.23—almost

five times the $28.97 average premium contribution for employee-only

coverage.

For low-income families, high premiums may make health insurance

unaffordable. For example, premiums of $150 per month represent

9 percent of gross income for a family with annual income of $20,000.

Lower-income and part-time employees are less likely than higher-income

Page 13 GAO/HEHS-97-35 Family Health Insurance
B-271082 

and full-time employees to have employment-based insurance, in part

because it is less affordable for them. (See fig. 5.)

Figure 5: Percentage of People Under

65 Years Old and Employees 18 to 64

Years Old With Private Health

Insurance Coverage, by Federal

Poverty Level, 1995

Under 65 Years Old 18-64 Years Old

0

20

40

60

80

100

22

30

55 58

87 87

Percent

0-100%

101-200%

Over 200% 

Federal Poverty Level

Note: The federal poverty level shows the relation of family size and income to the Federal Poverty

Income Guidelines. In 1996, a family of three with income at or below $12,980 would be

considered poor—or with income under 100 percent of the federal poverty level. A family of three

with income between 101 and 200 percent of the federal poverty level would have income

between $12,980 and $25,960.

Source: Analysis of March 1996 Current Population Survey.

A recent study found that 64 percent of the uninsured people interviewed

did not have insurance because they felt that they could not afford to

purchase it, while only 8 percent did not have insurance because they did

Page 14 GAO/HEHS-97-35 Family Health Insurance
B-271082 

not want or need it.13 In the same study, 36 percent of uninsured people

reported problems paying prior medical bills. Of both insured and

uninsured people having problems paying their medical bills, 49 percent

paid more than $1,000 in out-of-pocket medical expenses in the previous

year and 8 percent paid more than $5,000.

Employers Use Other

Strategies to Reduce Costs,

Especially Those

Associated With Family

Coverage

Some changes that employers have made to their benefits packages may

discourage employees from choosing family coverage. These benefit

changes include introducing flexible benefit plans and establishing

premium rates based on family size.

Some firms have designed their benefit plans in ways that encourage

employees in dual-income families to purchase health insurance coverage

from their spouses’ employers. This, coupled with increases in cost, can

eliminate duplicate coverage for dual-income families, which provides

savings for employers. It may also result in some employees dropping

coverage for their spouses or other family members.

Flexible Benefit Plans

Encourage Substitution of

Other Benefits for Family

Coverage

To control benefit-related cost increases and to broaden employees’

choice of benefits, large firms increasingly are offering flexible or

cafeteria-type benefit plans and flexible spending accounts. In 1995,

Hewitt Associates reported that 88 percent of the major firms in its

database offered at least one of these options. Flexible plans and accounts

allow employees to select the benefits they want from a menu of benefits,

thus allowing them to maximize the value of their benefits by selecting the

ones they need most. Generally, firms designate a portion of employee

salaries as per-year credits; employees then allocate these credits among

available benefits, including health insurance. The amount of

employer-provided flexible benefit credits is typically set each year with

reference to some target—such as the change in current cost of one health

insurance option—plus enough to cover certain other benefits. However,

the increased flexible benefit credits may not cover employees’ increased

costs. If employees choose health insurance whose cost, along with other

benefits, exceeds the employer-provided credits, employees must pay the

difference. Some firms allow employees to designate an additional portion

of their salary to increase their flexible benefits plan or set up a flexible

spending account.

13Karen Donelan, and others, “Whatever Happened to the Health Insurance Crisis in the United States?

Voices From a National Survey,” The Journal of the American Medical Association, Vol. 276, No. 16

(1996), pp. 1346-50. An earlier study also showed cost was a major issue for the uninsured: See David

U. Himmelstein, and Steffie Woolhandler, “Care Denied: U.S. Residents Who Are Unable to Obtain

Needed Medical Services,” American Journal of Public Health, Vol. 85, No. 3 (1995), pp. 341-44.

Page 15 GAO/HEHS-97-35 Family Health Insurance
B-271082 

By eliminating the direct link between their contributions and the cost of

health insurance, firms can use flexible benefit plans to control their

benefit costs. Over time, they can make other changes to shift more cost to

employees with families, such as expanding the benefits for employees

using employee-only coverage and restraining benefits for families. For

example, one major high-technology manufacturing firm gives a $1,000

credit to an employee’s flexible benefits account if the employee chooses

to get health insurance coverage through his or her spouse. The employee

can use this $1,000 credit for other benefits. Even with the credit, the firm

saves over $2,000 per year, per employee, when the employee chooses not

to elect family coverage.

Tier Rating Offers Greater

Differentiation of Premium

Rates

Some employers restructured employee premium payments to base them

on the number of dependents covered. This tier structure can reduce

health insurance costs for smaller families but raise them for larger

families. Without these changes, smaller families are subsidizing larger

ones. Lower premiums for a family composed of a single parent with one

child could encourage such families to purchase coverage for dependents.

But a higher premium for the larger family could discourage such families

from purchasing coverage for their dependents.

A simple two-tier structure would include one price for employee-only

coverage and another price for employee and dependent coverage.

According to some of the benefit consultants we spoke with, increasing

the number of tiers beyond the two-tier structure is becoming more

common for large firms. The majority of major firms have three or more

tiers. (See fig. 6.) An example of a three-tiered plan would be one that has

separate premium prices for employee-only coverage, for employee plus

one dependent, and for employee with two or more dependents.

Page 16 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Figure 6: Coverage Tiers for Major

Firms in 1995

No Employee 

Contributions

5%

Two Tiers

24%

Three Tiers

45%

Four Tiers

24%

Other

2%

Source: Hewitt Associates, Salaried Employee Benefits Provided by Major U.S. Employers in

1995, 1996.

Employers Implement

Strategies to Shift Burden of

Coverage Onto Working

Spouses

According to benefits consultants, some firms design their benefit plans to

encourage employees with working spouses to get their insurance from

their spouses’ company. These strategies include

• refusing to cover a spouse if the spouse has other health insurance

coverage,

• providing incentive payments to employees who refuse family coverage,

• imposing a surcharge for working spouses covered as dependents, and

• refusing to provide dependent coverage unless the employee is the family’s

primary wage-earner.

For example, one major manufacturing firm offers a policy that

supplements major medical for employees’ families—covering costs that

other policies do not—if the employees use their spouses’ health

insurance as the primary coverage. This policy covers 100 percent of the

first $1,000 of eligible expenses for the employee—thus allowing the

employee to avoid any deductible on the primary policy—and then pays an

additional 25 percent of covered expenses, with an out-of-pocket

maximum of $1,500.

Page 17 GAO/HEHS-97-35 Family Health Insurance
B-271082 

How often these strategies are used is not known. In addition, some of

these strategies are difficult to implement without the cooperation of

employees because they depend on self-reporting of other coverage by

working spouses.

Whether or not such strategies lead to a loss of coverage may depend on

family circumstances. Where dual-income families have more than one

source of coverage and can absorb any increase in costs, the effect on

coverage might be minimal. A 1992 survey showed that only 30 percent of

major companies allowed their employees to opt out of health insurance

coverage without at least a sworn statement that the employees had other

coverage. However, even firms that require that the employees have

coverage may not require their employees’ dependents to have coverage.

Loss of Dependent

Coverage Accounts

for Most of the Recent

Loss in Private

Coverage

As employers dropped coverage or raised the cost of coverage for

employees and families, the percentage of people with private health

insurance coverage declined. In 1989, 75 percent of people under 65 years

old had private health insurance; by 1995, this number dropped to just

under 71 percent. Most of this decline was among dependents.14 Changing

or losing jobs leads to breaks in coverage, but even when working steadily

on the same job, employees and their families can lose their insurance.

Children and working-age adults both lost health insurance coverage and

losses were greatest among lower-income people. In 1989, 76 percent of

working-age adults and almost 74 percent of children under 18 years old

had private insurance. In 1995, almost 73 percent of working-age adults

had private health insurance compared with almost 66 percent of children.

If the same percentage of children and working-age adults had been

privately covered in 1995 as had been covered in 1989, about 5 million

more children and about 5 million more adults would have had private

insurance.

Between 1989 and 1995, a larger percentage of people under 65 years old

whose incomes were at or below 200 percent of the federal poverty level

lost private insurance than those whose incomes were above the

200 percent level. For the poorer group, coverage dropped from about

45 percent in 1989 to less than 40 percent in 1995. Private coverage for

those with incomes above 200 percent of the federal poverty level also

dropped but by less—from about 89 percent to 87 percent.

14Employment-based coverage is over 90 percent of all private coverage. We discuss trends in private

coverage in this section because changes in the CPS have made data on employment-based coverage in

1994 incompatible with previous years’ data on employment-based coverage. (See app. I.)

Page 18 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Most of the overall decline in private coverage is due to the loss of

coverage for dependents—between 69 and 91 percent, depending on

which years are compared.15 Both children and adults lost coverage as

dependents. (See fig. 7.) In addition to the loss of children’s dependent

coverage cited above, 24 percent of adults had private dependent coverage

in 1989, which dropped to 21 percent by 1995—almost all of the drop in

adult coverage in those years. In contrast to the loss of adult dependent

coverage, the percentage of working-age adults as the primary holder of

private health insurance was similar in 1989 and 1995—51.6 percent

compared with 51.4 percent.

15Sixty-nine percent of the decline was due to loss of dependent insurance comparing 1989 with 1993.

Comparing 1989 and 1995, dependent coverage becomes an even greater percentage of the loss in

private coverage—over 90 percent. However, changes in the CPS for March 1995 may have affected

our analysis for 1995, so we are reporting a range of estimates. (See app. I.) For a different analysis of

the CPS, which came to a similar conclusion, see John Sheils, and Lisa Alecxih, Recent Trends in

Employer Health Insurance Coverage and Benefits, prepared by The Lewin Group, Inc., for the

American Hospital Association (Washington, D.C.: American Hospital Association, 1996). These

researchers chose to adjust earlier years’ CPS data so that they could compare employment-based

coverage in 1994 with earlier years.

Page 19 GAO/HEHS-97-35 Family Health Insurance
B-271082 

Figure 7: Percentage of People Under 65 Years Old With Private Dependent Health Insurance Coverage, 1989-95

1989 1991 1993 1995

0

10

20

30

40

50

39

36 36 35

Percent

Source: GAO analysis of the March 1990, 1992, 1994, and 1996 Current Population Survey.

Job change is not the only reason for loss of coverage. One study showed

that between February 1991 and September 1993, 36 percent of adults and

children who lost insurance for at least 1 month were dependents of a

employee who remained on the same job.16 Another 25 percent of adults

and children experienced breaks in their insurance coverage when a

family member changed jobs or occupations and 21 percent lost insurance

at the same time an employed family member lost his or her job. Some

children lost insurance because they became too old to be covered under

their parent’s policy, while other adults and children lost insurance

because of the death of or divorce from an employed family member.

Some of the loss of adult dependent coverage probably represents shifting

among adults in their coverage status. It is likely that some dual-income

families found it less costly to have each earner covered under his or her

own employer’s policy—these families may now have two policyholders.

However, other families might have an employee who dropped or lost

16Sheils and Alecxih, Recent Trends in Employer Health Insurance Coverage and Benefits.

Page 20 GAO/HEHS-97-35 Family Health Insurance
B-271082 

coverage entirely. For example, women were and continue to be more

likely to be covered as dependents on others’ health insurance policies

than men, but the percentage of women as policyholders has increased. In

1989, almost 55 percent of women 18 to 64 years old with private health

insurance were policyholders; by 1994, this number was almost 60 percent.

Similarly, comparing 1989 with 1995, the percentage of people who were

married without children increased as policy holders, which helped offset

their decrease in dependent coverage.

Reductions in Private

Coverage May Shift

More Burden for

Health Care to Public

Payers

Families that do not have individual or employment-based private health

insurance basically have one of two options: they can remain uninsured or

they can seek health insurance through public assistance. Part of the

burden to pay for health care for individuals without private insurance

then falls onto taxpayers through directly subsidized health providers,

such as public hospitals or community clinics, or through publicly

subsidized insurance. Medicaid, the main public health insurance program

for children and working-age adults, has greatly expanded its enrollment

in recent years. Evidence is mixed on the extent to which Medicaid

expansion served to dampen the effects of deteriorating private coverage

or exacerbated losses in private coverage by encouraging some

low-income people to drop private insurance.

Welfare reform efforts may decrease Medicaid enrollment and increase the

percentage of uninsured Americans. Eligibility rules have changed for

some groups, and states will be moving welfare recipients into the

workforce. However, low-income adults moving into the workforce may

not gain access to private insurance, while losing Medicaid coverage.

Being Uninsured Has

Serious Health and

Financial Consequences

Being uninsured can have serious health and financial consequences.

According to a recent survey funded by the Kaiser Family Foundation,

45 percent of uninsured adults had problems getting health care and most

reported having serious financial and health consequences as a result.

Thirty-six percent of uninsured adults reported having trouble paying

health care bills.17 Moreover, people without health insurance tend to

forego health care more than those with health insurance. Therefore,

when the uninsured seek care, their condition often is more advanced and,

17Twenty-eight percent had problems with getting care and paying bills, 17 percent only had problems

getting care, 8 percent only had problems paying bills, and 47 percent reported neither problem.

Page 21 GAO/HEHS-97-35 Family Health Insurance
B-271082 

thus, more expensive to treat.18 Compared with all adults, uninsured adults

who had trouble getting care or paying their health care bills were more

likely to be in fair or poor health (34 percent compared with 19 percent),

to be disabled (38 percent compared with 14 percent), or to have been

hospitalized in the previous year (21 percent compared with 12 percent).19

People without health insurance are more likely to seek care in public

clinics and hospital emergency rooms—increasing the burden on these

facilities. Covering the expenses of treating the uninsured has become

increasingly difficult for hospitals. Due to more aggressive contracting by

insurers and managed care companies, these payers are less likely to pay

full hospital charges. Public payments to hospitals through Medicaid and

Medicare have helped hospitals cover the cost of caring for the uninsured,

although Medicare and Medicaid traditionally paid less than full charges

for hospital costs. But in the past, private payers helped to subsidize the

difference. Increased use of managed care in the public sector in some

areas of the country may also be shifting patients away from the hospitals

that primarily serve the uninsured.

As Private Coverage

Eroded, Medicaid

Expanded—but So Did the

Uninsured

While the percentage of people with private insurance declined, the

percentage of people with Medicaid coverage increased. In 1987, about

18 million people under 65 years old had public insurance through

Medicaid; by 1995, this number escalated to almost 29 million. More

families sought assistance through AFDC and Supplemental Security

Income (SSI)—which entitled them to Medicaid coverage as well—and

Medicaid eligibility was expanded to include pregnant women and

children. In addition, several states, through federal waivers of Social

Security law, expanded Medicaid coverage to low-income populations not

previously eligible. While expanding Medicaid helped to stabilize the

percentage of insured people in families with incomes below 200 percent

of the federal poverty level between 1989 and 1994, a greater percentage of

people with family incomes above 200 percent of the federal poverty level

were uninsured in 1994.

According to two studies, expanded government insurance programs may

have encouraged some families to drop private health insurance coverage

18See David U. Himmelstein, and Steffie Woolhandler, “Care Denied: U.S. Residents Who Are Unable to

Obtain Needed Medical Services.”

19See Donelan, and others, “Whatever Happened to the Health Insurance Crisis in the United States?

Voices from a National Survey.”

Page 22 GAO/HEHS-97-35 Family Health Insurance
B-271082 

in favor of Medicaid.20 The extent to which this happens is unclear,

however, because three other studies found no effect.21 Cutler and Gruber

estimate that between 1987 and 1992, 17 percent of the decrease in

employment-based insurance was due to Medicaid expansions for

pregnant women and children. They attribute the other 83 percent to

changes in employer behavior unrelated to Medicaid generosity, changes

in the demographic mix of the population, and economic conditions at the

time. Dubay and Kenney, using somewhat different assumptions, estimate

that 12 to 18 percent of children’s increase in Medicaid coverage was

linked to a reduction in employment-based health insurance coverage.

They also state that children above federal poverty levels were more likely

to have displaced private insurance with Medicaid than poor children.

Unless the decline in private insurance coverage abates, public payers may

be facing increased costs for health care—either for uncompensated care

or public insurance. If employment-based insurance continues to decline,

the number of people who are uninsured will likely increase. The Lewin

Group, Inc., has estimated that the number of uninsured Americans will

increase from about 40.0 million Americans in 1995 to 45.6 million

Americans in 2002.

Low-Income Families May

Lose Coverage Through

Welfare Reform

Whether Medicaid will continue to expand its enrollment and help hold

down growth in the number of uninsured people over the next few years is

unclear. Under welfare reform, eligibility rules have changed in ways that

could affect Medicaid coverage for low-income children and adults.

Before reform, over 60 percent of the children and adults receiving

assistance through Medicaid were automatically enrolled under AFDC or

SSI. Under the new welfare program—Temporary Assistance for Needy

Families (TANF)—families receiving cash assistance will not be

automatically enrolled in Medicaid unless a state chooses to do this. Past

studies of the Medicaid population have shown that automatic enrollment

in Medicaid for AFDC recipients led to higher coverage levels than among

20See David M. Cutler, and Jonathan Gruber, Does Public Insurance Crowd Out Private Insurance?

National Bureau of Economic Research, working paper No. 5082 (Cambridge, Mass.: 1995), and Lisa

Dubay, and Genevieve Kenney, Revisiting the Issues: The Effects of Medicaid Expansions on Insurance

Coverage of Children (Washington, D.C.: The Urban Institute, 1995).

21See Lara D. Shore-Sheppard, “Stemming the Tide? The Effect of Expanding Medicaid Eligibility on

Health Insurance Coverage” (unpublished draft, Nov. 1995), Lara D. Shore-Sheppard, “The Effect of

Expanding Medicaid Eligibility on the Distribution of Children’s Health Insurance Coverage”

(unpublished draft presented at the Cornell/Princeton conference on Reforming Social Insurance

Programs, May 1996), and Esel Y. Yazici, “Medicaid Expansions and the Crowding Out of Private

Health Insurance” (paper presented at the 18th Annual Research Conference of the Association for

Public Policy Analysis and Management, Pittsburgh, Penn., Nov. 2, 1996).

Page 23 GAO/HEHS-97-35 Family Health Insurance
B-271082 

people who had to apply separately for Medicaid. If states develop

separate application processes for TANF and Medicaid, such processes may

raise barriers to Medicaid enrollment.

Generally, families who would have qualified for AFDC-Medicaid coverage

will still qualify for Medicaid. The law extends eligibility to people who

would have been eligible under AFDC rules in effect as of July 16, 1996.

However, states can roll back the July 16, 1996, AFDC income standards to

May 1, 1988, levels. States also can raise these levels for inflation and can

use more liberal methodologies to determine countable income and

resources. The new law allows states to terminate Medicaid eligibility for

any adult who is terminated from TANF because of failure to work, but their

minor children cannot be terminated from Medicaid on that basis. The law

also extends Medicaid for up to a year for those who either become

employed or have increased earnings and received Medicaid under the

prewelfare reform AFDC eligibility criteria in 3 of the preceding 6 months.

There are no changes in current eligibility rules for pregnant women and

children based on age and income. However, SSI eligibility for children

with disabilities is tighter under the new law, which could reduce

Medicaid enrollment of SSI children. Some children who lose eligibility

based on SSI or because their families exhaust transitional Medicaid may

be able to gain eligibility based on age and income.

The new law limits eligibility in a significant way—based on citizenship

status. Before the new law, all legal immigrants and permanent residents

who qualified based on other eligibility criteria were eligible for Medicaid.

Under the new law, qualified aliens currently residing in the United States

will be eligible for Medicaid only at the state’s option, unless a qualified

alien is a member of one of the excepted groups whose Medicaid eligibility

is mandated by law.22 Qualified aliens who enter the country in the future

will be banned from Medicaid coverage for 5 years from their date of

entry, except for treatment of emergency medical conditions.

Conclusion As the cost of health insurance escalated, many employers restructured

their benefits. Some employers dropped health insurance coverage

22A qualified alien is a person lawfully admitted for permanent residence, asylees, refugees, persons

paroled into the United States for at least 1 year, persons whose deportation has been withheld, and

persons granted conditional entry. The excepted groups of qualified aliens are legal permanent

residents with 40 qualifying quarters of work; and for 5 years from entry to the U.S.—refugees, asylees,

and persons whose deportation has been withheld; and certain veterans and active duty military and

their families.

Page 24 GAO/HEHS-97-35 Family Health Insurance
B-271082 

entirely—particularly small employers—shifting the burden entirely to

employees. But more commonly, employers increased the amount

employees had to pay to gain coverage, particularly for family coverage.

As this occurred, coverage became less available and less affordable for

many Americans. The percentage of Americans under 65 years old with

private health insurance decreased. Thus, many Americans who are unable

to purchase health insurance for themselves and their families have

trouble getting health care. In particular, some children and working

adults who earn low wages are being squeezed out of the private insurance

market. At the same time, many of these Americans are not eligible for

public medical assistance. This slow erosion of private coverage

contributed to a loss of coverage—leaving more than 40 million Americans

under 65 years old uninsured.

Public pressure to increase publicly funded care may intensify if the

number of Americans who lose private insurance coverage continues to

rise. However, state and federal efforts to reform welfare may decrease

the number of people covered through Medicaid. In addition, policymakers

have become concerned that increasing public coverage will encourage

employers or families to drop private coverage in favor of public coverage.

If the availability of both public and private coverage continues to erode,

the number of uninsured will inevitably continue to grow.

Through welfare reform, states will be trying to move families off

assistance and into the private sector. Ideally, as welfare recipients begin

working, they will gain access to private insurance. However, former

welfare recipients tend to land low-wage jobs, which often do not offer

health insurance coverage or may not offer insurance which they can

afford. Even after a year in the workforce, many former welfare recipients

may still not be able to access or afford private coverage for their families.

This suggests that low-income working families may continue to need

subsidized health insurance if they are to have health insurance coverage.

Agency Comments We sought comments on a draft of this report from experts on private

health insurance issues and from the Health Care Financing

Administration on the section of the draft report that dealt with Medicaid

and welfare reform. The reviewers generally agreed with our report, but

provided technical suggestions that we included where appropriate.

Page 25 GAO/HEHS-97-35 Family Health Insurance
B-271082 

As agreed with your office, we plan no further distribution of this report

for 30 days. At that time, we will make copies available on request. Please

contact me at (202) 512-7114 or Michael Gutowski at (202) 512-7128 if you

or your staff have any further questions. This report was prepared by

Michael Gutowski, Sheila Avruch, Paula Bonin, and Karen Sloan.

Sincerely yours,

Jonathan Ratner

Associate Director, Health Financing

 and Systems Issues

Page 26 GAO/HEHS-97-35 Family Health Insurance
Page 27 GAO/HEHS-97-35 Family Health Insurance
Contents

Letter 1

Appendix I 

Information Sources

and Methodology

30

Sources of Information for This Report 30

Methodological Issues in the CPS Analysis 31

Appendix II 

Average Monthly

Health Insurance

Premiums for

Employer-Sponsored,

Employee-Only, and

Family Coverage,

1989-96

33

Related GAO Products 36

Table Table 1: Average Monthly Premium Contributions Paid by

Employees in Large Firms, 1988, 1989, 1991, and 1993

12

Figures Figure 1: Increases in Health Insurance Premiums, 1991 to 1996 6

Figure 2: Percent Increases in Health Insurance Premiums for

Employee-Only and Family Coverage, 1989-96

7

Figure 3: Percent of Major Firms Offering Health Insurance With

No Employee Premium Contribution, 1990 and 1995

11

Figure 4: Median Monthly Premium Contributions by Employees

for Indemnity and PPO Plans in Major Firms 1990 and 1995

13

Figure 5: Percentage of People Under 65 Years Old and

Employees 18 to 64 Years Old With Private Health Insurance

Coverage, by Federal Poverty Level, 1995

14

Figure 6: Coverage Tiers for Major Firms in 1995 17

Figure 7: Percentage of People Under 65 Years Old With Private

Dependent Health Insurance Coverage, 1989-95

20

Page 28 GAO/HEHS-97-35 Family Health Insurance
Contents

Abbreviations

AFDC Aid to Families With Dependent Children

CHAMPUS Civilian Health and Medical Program of the Uniformed

Services

CPS Current Population Survey

DOL Department of Labor

HMO health maintenance organization

POS point of service

PPO preferred provider organization

SSI Supplemental Security Income program

TANF Temporary Assistance for Needy Families

Page 29 GAO/HEHS-97-35 Family Health Insurance
Appendix I 

Information Sources and Methodology

This report used several sources of information, including the Bureau of

the Census’ Current Population Survey. This appendix discusses the

sources of information and selected information on the CPS and how we

analyzed it.

Sources of

Information for This

Report

Several sources of information can be used to track trends in health

insurance coverage. Each of the sources we used provides different

information in different ways for different years. In general, less

information is available on small businesses than on large and major firms.

We define large firms as those with at least 100 employees and major firms

as those with over 1,000 employees. Therefore, we focused on large and

major firms. Consequently, we may have overstated support for employer

coverage of health insurance because larger firms are more likely to

provide coverage to employees and families than smaller firms.

We used the following sources of information:

DOL’s Bureau of Labor Statistics. The Bureau’s surveys of employee

benefits provide representative data for 34 million employees in medium

and large private establishments (places of work that employ 100 or more

people) in 1988, 1989, 1991, and 1993 and for 49 million employees in small

private establishments (places of work that employ fewer than 100 people)

in 1990, 1992, and 1994. The Bureau surveys establishments of different

size in alternate years. We reported information from the surveys on

medium and large establishments (which fit our definition of large firms)

and state and local governments.

The Health Insurance Association of America. The Association began a

survey in 1987 that was continued for several years.

KPMG Peat Marwick. Since 1991, KPMG Peat Marwick has conducted a

nationwide telephone survey of about 1,000 randomly selected private and

public employers with 200 or more employees on the health benefits they

provide. The survey instrument and sample design is similar to the Health

Insurance Association of America surveys and, thus, can be compared.

Hewitt Associates. This company collects information on benefits

provided by major U.S. employers (many with over 5,000 employees) and

has published reports on major companies’ benefits.

Page 30 GAO/HEHS-97-35 Family Health Insurance
Appendix I 

Information Sources and Methodology

The Robert Wood Johnson Foundation. The Foundation studied health

insurance coverage in 10 states by surveying over 22,000 establishments.

The Bureau of the Census’ CPS. The CPS is a nationally representative

survey that is the official source of government statistics on employment

and unemployment. Every March the Bureau collects additional

information on health insurance coverage. We used the CPS to measure

private insurance coverage and private dependent insurance coverage in

1989, 1991, 1993, and 1995. Because of certain methodological changes

implemented in March 1995 and continued in March 1996 (which affected

the 1994 and 1995 data), including changes in the questionnaire, we

considered it more appropriate to compare private insurance coverage,

rather than make such comparisons for employment-based insurance

coverage in 1995 to earlier years.

We did not independently verify data from these sources. The private

surveys are proprietary, and DOL and the Bureau of the Census conduct

their own validity and reliability checks of their data. We checked some of

our CPS analyses against published Census data and have consulted with

the Bureau of the Census to ensure accurate analyses of its data files.

Methodological Issues

in the CPS Analysis

For the March 1995 CPS, the Bureau of the Census implemented a number

of changes in an effort to improve the accuracy and ease of administering

the survey. These changes include moving to a computer-assisted

telephone interviewing system and reordering and rewording survey

questions on health insurance. The earlier questionnaire asked people

(1) if they had private insurance, (2) if they were the policyholder, (3) if

the insurance was obtained through their employment, and (4) who else

was covered as a dependent. The new questionnaire asks (1) if they have

private insurance through an employer or union; (2) who is the

policyholder; (3) who else is covered; and (4) if they have purchased

individual health insurance and, if so, additional people who are covered

by this policy.

These changes appear to affect how people answer questions about their

insurance coverage, which can affect estimates of insurance coverage.

These changes also can affect the comparability of 1994 and subsequent

years’ estimates with previous years’ estimates. When the 1994 data were

released, officials at Census stated that the 1994 estimate of overall private

insurance agreed well with previous years’ estimates. However, the

number of people who report that their private insurance coverage comes

Page 31 GAO/HEHS-97-35 Family Health Insurance
Appendix I 

Information Sources and Methodology

from their employer or union increased, while the number who reported

that their private insurance was individually purchased decreased.

Therefore, because these apparent differences may be due to the

questionnaire change—rather than actual changes in the composition of

private health insurance coverage—comparisons of employment-based

insurance coverage in 1994 and 1995 with previous years may not be

appropriate to understand trends in coverage. In particular, dependents

appeared to be misclassified as not having employment-based insurance in

past surveys. This is why our CPS analysis compares private insurance,

rather than employment-based insurance.

Because we were concerned that changes in the questionnaire would

affect estimates of private dependent health insurance coverage, we also

partially analyzed the March 1994 CPS (1993 data), to compare dependent

coverage in 1993. However, the change in the questionnaire did not appear

to affect the estimates of dependent coverage.

Our work was conducted between February and November 1996 in

accordance with generally accepted government auditing standards.

Page 32 GAO/HEHS-97-35 Family Health Insurance
Appendix II 

Average Monthly Health Insurance

Premiums for Employer-Sponsored,

Employee-Only, and Family Coverage,

1989-96

Plan type 1989a 1991 1992 1993 1994 1995 1996

Percent

increase

1989-96

Conventional

Employee-only $119 $145 $154 $170 $181 $166 $174 46

Family 268 355 384 441 463 433 449 68

HMO

Employee-only 116 139 148 158 166 160 157 35

Family 267 350 377 422 450 423 423 58

Preferred provider organization

Employee-only 119 150 157 181 177 174 181 52

Family 271 376 412 454 453 433 448 65

aThe 1989 survey included smaller firms. Smaller firms generally had higher premium costs. We

used the average cost by type of insurance and, for HMOs, calculated a weighted average by

type of HMO. This made baseline insurance costs in 1989 a little higher for indemnity plans and

HMOs and lower for PPOs than if we had only reported costs for firms with 1,000 or more

employees.

Source: Health Insurance Association of America and KPMG Peat Marwick. The Health Insurance

Association of America survey was of about 2,600 public and private employers with at least 2

employees (for 1989) and the KPMG Peat Marwick surveys were of about 1,000 randomly selected

public and private employers with 200 or more employees (all subsequent years).

Page 33 GAO/HEHS-97-35 Family Health Insurance
Appendix II 

Average Monthly Health Insurance

Premiums for Employer-Sponsored,

Employee-Only, and Family Coverage,

1989-96

Page 34 GAO/HEHS-97-35 Family Health Insurance
Appendix II 

Average Monthly Health Insurance

Premiums for Employer-Sponsored,

Employee-Only, and Family Coverage,

1989-96

Page 35 GAO/HEHS-97-35 Family Health Insurance
Related GAO Products

Private Health Insurance: Millions Relying on Individual Market Face Cost

and Coverage Trade-Offs (GAO/HEHS-97-8, Nov. 25, 1996).

Medicaid and Uninsured Children, 1994 (GAO/HEHS-96-174R, July 9, 1996).

Health Insurance for Children: Private Insurance Coverage Continues to

Deteriorate (GAO/HEHS-96-129, June 17, 1996).

Medicaid: Spending Pressures Spur States Toward Program Restructuring

(Testimony, GAO/T-HEHS-96-75, Jan. 18, 1996).

Health Insurance for Children: State and Private Programs Create New

Strategies to Insure Children (GAO/HEHS-96-35, Jan. 18, 1996).

Medicaid and Children’s Insurance (GAO/HEHS-96-50R, Oct. 20, 1995).

Health Insurance for Children: Many Remain Uninsured Despite Medicaid

Expansion (GAO/HEHS-95-175, July 19, 1995).

Medicaid: Spending Pressures Drive States Toward Program Reinvention

(GAO/HEHS-95-122, Apr. 4, 1995).

Medicaid: Restructuring Approaches Leave Many Questions

(GAO/HEHS-95-103, Apr. 4, 1995).

Medicaid: Experience With State Waivers to Promote Cost Control and

Access Care (GAO/HEHS-95-115, Mar. 23, 1995).

Uninsured and Children on Medicaid (GAO/HEHS-95-83R, Feb. 14, 1995).

Employer-Based Health Insurance: High Costs, Wide Variation Threaten

System (GAO/HRD-92-125, Sept. 22, 1992).

Access to Health Insurance: State Efforts to Assist Small Businesses

(GAO/HRD-92-90, May 14, 1992).

(101396) Page 36 GAO/HEHS-97-35 Family Health Insurance
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 6015

Gaithersburg, MD 20884-6015

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100