Employer-Sponsored Health Insurance and the Promise of Health Insurance Reform

Increases in the cost of insurance premiums under employee-sponsored plans have outpaced worker earnings over the last 20 years. Employee contributions are twice the 1996 levels for single and family coverage.

Employee-sponsored insurance (ESI) represents over 90 percent of private health insurance in the United States. The costs of ESI have a significant impact on the labor market. This article explores how reforms to the broader health care system might affect ESI. The authors describe changes over time in the prevalence of ESI. They consider two scenarios that have crucial implications for ESI: expansion of health care in the public and private sectors. The authors also make projections about the future of ESI under mandatory and voluntary approaches to health care reform.

Key Findings:

  • Over time, it has become significantly less likely that employers will offer ESI as a retirement benefit.
  • Large firms, those with more than a thousand employees, are much more likely than small firms, 50 or fewer, to offer a choice of insurance options.

This article describes the state of the ESI system, considers possible directions of health care reform, and discusses ESI in relation to the labor market and the health system.