Employers are the principal source of health insurance in the United States, providing health benefits to over 60% of nonelderly people in 2003.³ Sixty-six percent of employees working in firms that offer benefits are covered by their firms’ health coverage. Most workers are offered health coverage at work, and the vast majority of workers who are offered coverage take it. Workers may not be covered by their own employer for several reasons: their employer may not offer coverage, they may be ineligible for benefits offered by their firm, or they may refuse an offer of coverage from their firm.

• In firms offering health benefits, 66% of workers are covered by their firms’ health plan (Exhibit 3.2). The rate of coverage varies by certain characteristics of the firm, such as industry and the percentage of part-time and low wage employees.
  
  
  • Coverage rates in firms offering health benefits do not differ significantly by firm size, but they do vary by industry, likely due to differences in eligibility. The coverage rate for workers in the retail industry is 46%, compared to 83% for state and local government workers and 79% for those working in the transportation, communication, and utility industries, and 79% in the manufacturing industry (Exhibit 3.2).
    
    
  • Among firms offering health benefits, higher wage firms—where fewer than 35% of workers earn $20,000 or less annually—have higher coverage rates than lower wage firms—where 35% or more of workers earn $20,000 or less annually. Seventy percent of workers in higher wage firms that offer health benefits are covered, compared to 49% of workers in lower wage firms offering benefits.
    
    
• Even in firms that offer coverage, not all employees are eligible for their firm’s health benefits. Additionally, not all eligible employees with an offer of health coverage take the offer of coverage. The number of workers covered is a product of both the percentage of workers who are actually eligible for the firm’s health insurance and the percentage who choose to “take-up” (i.e., elect to participate in) the benefit.
  
  
• • Eligibility for health benefits does not vary by firm size and is unchanged from last year. Overall, 80% of workers in firms offering health benefits are eligible for coverage (Exhibit 3.2).
    
    
  • Employees who are offered coverage through their employer generally elect to take the offer. Eighty percent of workers in small firms (3-199 workers) and 84% of workers in large firms (200 or more workers) take-up coverage. These numbers are statistically unchanged from 2004 (Exhibit 3.2).
    
    
  • The likelihood of accepting a firm’s offer of coverage varies by firm wage level. Employees in higher wage firms—where fewer than 35% of workers earn $20,000 or less annually—are more likely to take-up coverage (84%) than employees in lower wage firms (74%) – where 35% or more of workers earn $20,000 or less annually.
    
    
• Most covered workers work in firms that impose a waiting period before coverage is available to new employees. Seventy-five percent of covered workers face a waiting period before coverage is available (Exhibit 3.7).
  
  
  • The average waiting period among all covered workers is essentially unchanged from last year at 1.7 months (Exhibit 3.6).