Coverage
| While the percentage of firms offering health benefits is statistically unchanged from last year, it has gradually declined over the last few years (Exhibit G). Annual changes have been small, but the cumulative result is a statistically significant decline in the percentage of firms offering health benefits, from 68% in 2001 to 63% in 2004.3 This drop is driven largely by a significant decline in the percentage of all small firms (3-199 workers) offering coverage during this time.4 The drop in offer rates are likely the result of multiple years of double-digit premium increases, combined with a slow job market. Driven by similar factors, the percentage of workers receiving health coverage from their own employer (including those working both for firms that offer and firms that do not offer coverage) declined significantly between 2001 and 2004, from 65% to 61%. A substantial portion of this decline occurred among all small firms (3-199 workers). | 
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Employers offering health benefits continue to vary substantially by firm size: only 52% of the smallest companies (3-9 workers) offer health benefits, while 74% of firms with 10-24 workers, and 87% of firms with 25-49 workers, and nearly all firms with 50 or more workers offer health benefits.
Even when a firm offers health insurance, not all workers get covered. Some workers are not eligible to enroll as a result of waiting periods or minimum work-hour rules, and others choose not to enroll because they must pay a share of the premium or can get coverage through a spouse. In firms that offer coverage, 80% of workers are eligible for coverage, and 82% of those eligible elect to enroll.
Fourteen percent of all firms offer health benefits to same-sex couples, and twelve percent offer health benefits to unmarried heterosexual couples. Jumbo firms (5,000 or more workers) are more likely to offer benefits to same-sex couples than smaller firms. There are no significant differences by firm size in firms’ likelihood of offering benefits to unmarried heterosexual couples.
Retiree Coverage
The recent passage of the 2003 Medicare Prescription Drug Improvement and Modernization Act, combined with cutbacks in coverage by several large national firms, has put a spotlight on retiree health benefits. In 2004, 36% of all large firms (200 or more workers) offer retiree health coverage, virtually the same percentage as last year, but down from 66% in 1988. Among all large firms offering retiree benefits, virtually all (96%) offer benefits to early retirees, while about three-quarters offer benefits to Medicare-age retirees.
Health Plan Enrollment and Choice
PPOs continue to be the most common plan in 2004, enrolling over half of all employees with health coverage. HMO enrollment remains stable this year, enrolling 25% of covered workers. Conventional (or indemnity) benefit plans enroll just five percent of employees. PPO coverage is available to almost eight in ten covered workers and HMO coverage is offered to just over half of covered workers. Enrollment in POS plans has declined over time, decreasing from 23% in 2001 to 15% in 2004.
Most workers with health coverage through their employer continue to have a choice of health plans, with just under half having a choice of three or more plans. Covered workers in all small firms (3-199 workers) are much less likely to have a choice of health plans than covered workers in all large firms (200 or more workers)—73% of covered workers in all small firms that provide coverage are offered just one health plan compared to 18% of covered workers in all large firms.
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3The decline in offer rate for all firms between 2001 and 2004 is significant at p<.10.
4The decline in the all small firm offer rate between 2001 and 2004 is significant at p<.10.
