Graduate Program

Economics

Degree Name

Master of Arts (MA)

Semester of Degree Completion

2005

Thesis Director

Dell Champlin

Thesis Committee Member

Hui Li

Thesis Committee Member

Mukti Upadhyay

Abstract

After a decade of erosion of employment-based health insurance coverage in the American population, the overall employment-based health insurance coverage increased beginning in the mid-1990s when the strong economy occurred. According to the previous studies, the labor market and health insurance premium are primary determinants of the coverage rate. However, in spite of the tight labor market and non-existent health care cost inflation (the growth of health insurance premiums is close to the growth of wages), the health insurance coverage of private-sector workers continued to decline. Since the private sector workers are the bulk of the population who benefit from employment-based health insurance, these two trends would appear to contradictory: Coverage for the overall increased, while coverage for private- sector workers continued to decline even under the strong economy. This thesis provides detailed evidence to describe and analyze the phenomenon.

Current Population Survey data evidence shows that a higher percentage of public sector workers and children getting health insurance through their own or family members' employers contributed to the overall increase of employmentbased health insurance. Furthermore, I emphatically analyze the decrease of coverage among private sector employees. The coverage rate is directly limited by three factors: offer rate (percentage of employees who work in an establishment offering an health insurance plan), eligibility rate (percentage of employees who are qualified for the health insurance plan provided by their employers), and take-up rate (percentage of employees who elect the plan when they are eligible for the health insurance provided by their employers). I examine these three rates to see how they affected the coverage rate. Medical Expenditure Panel Survey provides detailed data for private sector establishments and employees. By using decomposition of these three important rates whose product is the coverage rate, I find that employees' eligibility and take-up rate lead to the decline of coverage for private sector workers, especially the reduced take-up rate. Reasons leading to the decline of eligibility and take-up rate can explain the paradox - coverage of privatesector decreased during economic broom-, such as employers restricted access to health insurance, employees had to pay more contribution share of the health insurance premium, employees switching to other sources of health insurance.

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