Impacts of Rising Health Care Costs on Families with Employment-Based Private Insurance

A National Analysis with State Fixed Effects

Published in: HSR, Health Services Research, v. 47, no. 5, Oct. 2012, p. 2012-2030

Posted on RAND.org on January 01, 2012

by Hao Yu, Andrew W. Dick

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Research Questions

  1. How do rising health care costs affect employment-based private insurance?
  2. Do the effects differ by family income?

BACKGROUND: Given the rapid growth of health care costs, some experts were concerned with erosion of employment-based private insurance (EBPI). This empirical analysis aims to quantify the concern. METHODS: Using the National Health Account, we generated a cost index to represent state-level annual cost growth. We merged it with the 1996–2003 Medical Expenditure Panel Survey. The unit of analysis is the family. We conducted both bivariate and multivariate logistic analyses. RESULTS: The bivariate analysis found a significant inverse association between the cost index and the proportion of families receiving an offer of EBPI. The multivariate analysis showed that the cost index was significantly negatively associated with the likelihood of receiving an EBPI offer for the entire sample and for families in the first, second, and third quartiles of income distribution. The cost index was also significantly negatively associated with the proportion of families with EBPI for the entire year for each family member (EBPI-EYEM). The multivariate analysis confirmed significance of the relationship for the entire sample, and for families in the second and third quartiles of income distribution. Among the families with EBPI-EYEM, there was a positive relationship between the cost index and this group's likelihood of having out-of-pocket expenditures exceeding 10 percent of family income. The multivariate analysis confirmed significance of the relationship for the entire group and for families in the second and third quartiles of income distribution. CONCLUSIONS: Rising health costs reduce EBPI availability and enrollment, and the financial protection provided by it, especially for middle-class families.

Key Findings

  • Rising health costs reduced employment-based insurance's availability, enrollment, and financial protection.
  • The effects were significant for middle income families.

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