Duke 2008 | ASHE | Equity and Efficiency in Health and Healthcare

Rationale: Recent studies have found coverage through employer sponsored family plans continues to decline. A separate literature highlights the importance to workers at small firms of coverage as a dependent through a spouse working at a large firm. However, no study links these themes to investigate whether declining family coverage shifts the costs of workers and dependents previously covered through large firms to plans sponsored by small firms.

Objectives: The study examines two specific study questions. First, what is the relationship between worker firm size and health insurance coverage in married, two worker households? Second, has the decline in coverage through large firms led to increased coverage of workers and dependents by small firm workers?

Methodology: This study examines the 1996 - 2006 Annual Demographic Survey of the Current Population Survey (CPS) to estimate a series of four multinomial logit models testing whether spouses working for large firms and children previously covered through large firms have shifted to dependent coverage in group plans sponsored by small businesses. It documents trends in family coverage at both small and large firms for the years 1995, 2000 and 2005. It then examines whether declines in family policies at large firms shift family members to plans sponsored by small firms. This is done by examining the two groups that can possibly shift health insurance coverage between firms: two-worker married couples and their dependent children. Simulations based on the logit estimates demonstrate the changes in employer health insurance coverage for both policyholders and dependents at small and large firms.

Results: Simulations based on the logit models indicate that (1) access to dependent coverage through a large firm remains very important to small firm employees, (2) few large firm employees are shifting their coverage to their small firm spouses, (3) access to family plan sponsored by a large firm was most important for children, and (4) more workers are dropping coverage through their own employer and are switching to dependent coverage through their spouse. Rather than the hypothesized shifting from large firms to small firms, the study finds , independent of firm size, many firms are shifting the costs of their workers' coverage to other firms, both large and small.

Conclusions: This study finds little evidence that declining family coverage at large firms has increased the burden on employer plans sponsored by small businesses. Rather than shifting across firm size, both large and small firms are shifting their workers to any other firm, concentrating the costs of coverage to fewer and fewer firms.