Using the 1996 Medical Expenditure Panel Survey, the authors investigate differences between households with two earners and those with a single earner in ...
ARTICLE MCR&R 62:2 10.1177/1077558704273803 Abraham, Royalty (April/2005) Employer Health Insurance
Empirical Research
Does Having Two Earners in the Household Matter for Understanding How Well EmployerBased Health Insurance Works? Jean M. Abraham
University of Minnesota
Anne Beeson Royalty
Indiana University Purdue University Indianapolis Using the 1996 Medical Expenditure Panel Survey, the authors investigate differences between households with two earners and those with a single earner in households’ access to employer-based health insurance and the generosity of insurance options. They examine whether a household has an offer of coverage, whether a household holds coverage, and whether all household members are covered. They also explore whether two-earner households have more generous options as measured by the number and types of plans available, as well as contribution requirements. The authors find that having a second earner in the household dramatically improves both access to employer health insurance and the generosity of health plan choices, particularly for workers generally acknowledged to have little access, such as part-time workers and workers in small establishments.
Keywords:
Employer-based health insurance; household; access to coverage; insurance generosity; self-employed; small establishment; part-time
In 1950, when the U.S. system of employer-based health insurance was taking root, only 24 percent of married women participated in the labor force, and This article, submitted to Medical Care Research and Review on October 17, 2003, was revised and accepted for publication on March 9, 2004. Medical Care Research and Review, Vol. 62 No. 2, (April 2005) 167-186 DOI: 10.1177/1077558704273803 © 2005 Sage Publications
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most families included only one worker (Sharon Cohany, Bureau of Labor Statistics, personal communication, February 16, 2004). Generally, researchers interested in employer-based health insurance still tend to analyze insurance access, coverage, and generosity in terms of what is available to individual workers. However, today, in approximately 65 percent of nonelderly married couple families, both spouses are employed (Bureau of Labor Statistics 2001). If having a second earner in a household changes household health insurance options, then issues of access, coverage, and generosity must be examined at the household level. Our objective is to provide researchers and policy makers with a clear and comprehensive picture of how employer-based health insurance options change when evaluating access and generosity at the household level compared with the worker level. Very little is generally known about whether and how having a second earner in the household affects health insurance options. We recognize that household members’ employment decisions may be related to their health insurance options and that empirical analyses are needed to better understand this relationship. Here, we take the first step to inform such analyses by documenting how health insurance options differ for households with a single earner compared with households with two earners. Almost certainly the primary reason why there are not well-known “stylized facts” about household-level insurance options, especially with respect to the generosity and cost of health insurance, is the lack of data. There are few data sources that track detailed insurance information and allow matching of household members. Two earlier studies on related topics use the 1987 National Medical Expenditure Survey (National Center for Health Services Research and Health Care Technology Assessment 1987). Schur and Taylor (1991) focused on identifying how many two-earner households have two sources of coverage, while Monheit, Schone, and Taylor (1999) modeled the decision by a household to “double-cover,” whereby at least one household member is covered by two policies. In this article, we link the Insurance Component and the Household Component of the 1996 Medical Expenditure Panel Survey (MEPS 1996) in order to have the richest possible and more up-to-date information on households and employer insurance offerings. Since the MEPS contains information on all household members, we are able to investigate differences between workers from one- and two-earner households. We examine whether a worker’s This article was prepared for the conference, “The Employer as Agent in the Provision of Health and Retirement Benefits,” April 26, 2002. We thank the U.S. Department of Labor for providing financial support. We would also like to thank Jessica Vistnes, John Sommers, Jeannette Rogowski, and Jon Christianson for their helpful advice. The views expressed are solely the authors’ and do not reflect the views or opinions of the U.S. Department of Labor.
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household has an offer of employer health insurance, the likelihood that a worker is covered by employer insurance, and whether all family members are insured. We also document the range of plan options available to the household, including the number of plans, whether any of the offered plans have a freedom of choice of provider, and the minimum out-of-pocket premium contribution for family coverage. With growing concern about the increasing proportion of the population that is uninsured, policy makers are proposing measures to improve health insurance access for particularly vulnerable groups of employed individuals, including part-time workers, the self-employed, and workers in small establishments. In this study, we also estimate how access to employer health insurance and coverage generosity differ for vulnerable workers in single-earner versus two-earner households. We find that health insurance offers, coverage, and choices differ significantly for workers in two-earner families compared with single-earner households. We also find that having a second earner in the household substantially increases access to employer health insurance for part-time workers and workers employed in small establishments—findings that may be important for evaluating the effectiveness of targeted public policies to improve coverage access for the working uninsured. NEW CONTRIBUTION This study provides the most comprehensive and current evidence on the importance of household-level rather than worker-level analysis of access to, and coverage under, employer health insurance. It also provides, to our knowledge, the only evidence to date on measures of generosity of health plans available to the household. Unlike other studies, we also examine particular groups of vulnerable workers—part-time workers (e.g., those working less than 35 hours per week on average), the self-employed, and workers in establishments with 50 or fewer employees—and the extent to which their own lack of access is mitigated by access through a working spouse.
CONCEPTUAL FRAMEWORK We assume that many health care and health insurance decisions are made by families rather than separately by each individual in a family. This should be especially true when the employer-provided health insurance offered to one family member is available to other family members, as is almost always the case. Because other family members are eligible for a worker’s insurance, access to and generosity of insurance coverage are not determined solely by a
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worker’s own characteristics and the characteristics of his or her job, as is usually assumed in studies of the determinants of employer-provided insurance coverage. We test the hypothesis that the availability and generosity of coverage for a worker’s household depend not just on the worker’s own characteristics but also on whether there is a second earner in the household who might be offered employer-provided insurance. We hypothesize that having a working spouse increases the likelihood that a worker’s family will have access to health insurance. If the health insurance options of working spouses are not perfectly correlated, a second earner must be associated with some increase in the probability of access to coverage for the household. We hypothesize that this effect may be quite important and large enough to necessitate family-level, rather than individual-level, analyses of any number of questions involving health insurance access and coverage. We estimate two sets of models to examine how health insurance options differ between workers in single-earner households and workers in twoearner households. In the first set, we estimate an average two-earner effect across all worker categories. In the second set of models, we explore how this two-earner effect differs for part-time workers, workers in small establishments, and self-employed workers. This second analysis assesses the extent to which the negative effects on health insurance of being in these vulnerable job categories are mitigated by having access to coverage through a working spouse. Given the descriptive nature of this study, we take as given the employment status of household members for both sets of models. Our first objective is to identify how much employer health insurance options improve when a worker lives in a two-earner household. We estimate the model HIWHH = ƒ (Two- Earner Dummy, Married Dummy, Worker Characteristics, Unemployment Rate),
(1)
where HIWHH is the health insurance variable of interest defined for the worker’s household. Consider the equation for whether or not employer health insurance is offered. Here, HIWHH will equal 1 if any worker in the household is offered employer health insurance, and the two-earner dummy will equal 1 if the worker’s household includes a second worker. Including a two-earner dummy variable in the specification will provide a reduced-form estimate of the effect of having two earners in the household on whether the worker’s household is offered coverage. We also include a dummy variable corresponding to whether or not the worker is married in order to control for any
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unobservable differences between workers who are married and workers who are not. The two-earner dummy captures the effect of having two earners in the household, over and above any differences that should be attributed to selection into marriage or any behavioral response to marriage.1 Finally, we include as control variables age, education, sex, race, geographic region, and the local unemployment rate.2 Equation (1) is estimated for six different measures in order to understand how two-earner families fare relative to other households. We look at three basic dimensions, including whether any household member is offered employer insurance, whether any worker in the household is covered by employer insurance, and whether all members of the household are covered. These models are estimated as binary logit models with robust standard errors that allow for heteroskedasticity. In addition, we examine three measures of choice set generosity, including the number of plans available to the household, whether the household has a plan with freedom of choice of provider, and the minimum annual employee contribution (across all offered plans) for family coverage. We use ordinary least squares to estimate the models corresponding to the number of plans and the minimum employee contribution, and a binary logit model with robust standard errors to examine whether a household of a worker has a plan with freedom of choice of provider. Our second set of models focuses on how health insurance access and generosity differ for part-time workers, self-employed workers, and workers in 3 small establishments who are in single-earner versus two-earner households. We estimate the two-earner effect for these groups using an equation similar to (1) but including dummy variables for part-time, self-employed, and working in a small establishment (PT, SE, and SML, respectively) and interactions of each of these variables with both the two-earner and married dummies: HIWHH = ƒ (Two-Earner Dummy, Married Dummy, PT, SE, SML, PT × Two-Earner, SE × Two-Earner, SML × Two Earner, PT × Married, SE × Married, SML × Married, Worker Characteristics, Unemployment Rate)
(2)
To aid interpretation, consider the example of part-time workers. The marginal effect of PT will measure the effect of having a part-time worker in the household. The marginal effect of the interaction of PT and two-earner will capture how much that part-time effect changes when there are two earners in the household. We will compare the marginal effect on PT with the marginal effect on the interaction of PT and two-earner in order to measure the extent to
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which a second earner in the household offsets the negative effect of having a PT worker in the household. As before, we use binary logit specifications for the discrete dependent variables. Marginal effects for the main vulnerable worker effects (PT, SE, and SML) and the two-earner interaction effects (PT × Two-Earner, SE × Two-Earner, and SML × Two-Earner) are computed discretely. To illustrate, the marginal effect for the interaction of PT and twoearner is computed as the following: (P (PT = 1, two-earner = 1) – P (PT = 0, two-earner = 1)) – (P (PT = 1, two-earner = 0) – P (PT = 0, two-earner = 0)),
(3)
where P is the predicted probability of the outcome of interest.4 Standard errors for the marginal effects are bootstrapped.
DATA AND MEASURES We use two components of the 1996 MEPS for this analysis. The first is the Household Component (HC), which is a random sample of the civilian noninstitutionalized population of the United States, containing individuallevel data on demographic characteristics, employment status, health insurance, and medical care utilization for 22,601 persons. Household survey respondents who indicated that they were employed were asked for contact information regarding their place of employment as well as permission to contact their employer. These employers were surveyed about the number of plans they offered, the types of provider networks associated with the plans, total premiums, and employee contributions for each plan. Employers were asked to verify the household member’s eligibility and plan selection for those who held insurance. These data comprise the Insurance Component (IC) of the MEPS.5 Our definition of a household is based on the constructed Health Insurance Eligibility Unit (HIEU) identifier contained in the data file. An HIEU is a subfamily relationship unit constructed to include adults plus those family members who would typically be eligible for coverage under private family plans. These family members include spouses, unmarried natural or adoptive children who are age 18 or under, and children under age 24 who are full-time students (Agency for Healthcare Research and Quality 2001). Our study population consists of workers in households in which there is at least one employed member between the ages 19 and 64, who is not disabled, and not a full-time student. Measures of the three basic dimensions that we examine (offer, worker coverage, and coverage of all household members)
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come from the HC, while the three generosity dimensions describing the choice set are measured using variables contained in the IC. In analyses that use the generosity measures, our sample is smaller than the HC sample since only a subset of workers could be linked to the IC, either due to inaccurate contact information, failure to obtain permission to contact the employer from the household, or employer nonresponse.6 As a result, we use two samples for the analysis. The “full sample” from the HC includes 9,220 workers in 6,944 households and is used to evaluate the effect of two earners on offer, worker coverage, and coverage of all household members. The second sample, referred to as the “linked sample,” consists of 3,397 workers in 2,763 households. The latter is used to evaluate the effect of having two earners on choice set generosity. Table 1 provides variable definitions and descriptive statistics for both the dependent and explanatory variables. In addition to the variables of primary interest, our models control for both linear and quadratic measures of age and education, as well as dummy variables for whether the worker is nonwhite or male. Given the potential for geographic variation in employer health insurance, we also include a set of geographic region dummies for the Northeast, Midwest, and South (West is the excluded variable), and a measure of the unemployment rate for the county in which the worker lives.7
RESULTS AVERAGE TWO-EARNER EFFECT Our estimates reveal that offers, coverage, and choices differ significantly for families with two earners compared to other households. In Table 2, we report the probability derivatives and, for discrete variables, the difference in the probabilities evaluated at 1 and 0, for the model corresponding to equation (1).8 The effect of having two earners on the probability of a household having an employer offer of insurance is large. Controlling for both demographic factors and differences that could be attributed to selection into marriage, we find that being a worker in a two-earner household is associated with an 18-point increase in the probability of having access to insurance either through one’s own employment or through a working spouse. Workers in two-earner households are 20 points more likely to be covered and to have all household members covered, relative to those in single-earner households. One potential concern is that the two-earner dummy may be picking up an income effect, since on average, two-earner households have a (text continues on page 177)
174 Married Age Education Male Nonwhite Part-time
Explanatory variable Two-earner
MINOOP—Family ($)
Number of plans Freedom of choice
All members covered
Worker coverage
Dependent variable Offer
= 1 if worker is a member of a household with two earners = 1 if worker is married Age of worker Number of years of education = 1 if worker is male = 1 if worker is nonwhite = 1 if worker is employed fewer than 35 hours per week, on average
= 1 if any worker in household is offered employer health insurance = 1 if any worker in household is covered by employer health insurance = 1 if all household members are covered by employer health insurance Number of plans available to household of a worker = 1 if household has a plan available that permits freedom of choice of provider Minimum annual out-of-pocket contribution associated with family coverage
Definition
—
—
0.38
—
—
0.17
0.49 —
0.60 —
0.5 0.48 11.05 2.82 0.5 0.37
0.49
0.54
0.49 0.64 39.25 12.96 0.53 0.167
0.48
0.642
0.18
0.373 0.54 39.33 12.98 0.51 0.176
1,125
0.62
0.56 3.64
0.526
0.604
M
0.39
0.48 0.5 11.26 2.77 0.5 0.38
1,205
0.43
0.5 6.57
0.5
0.49
SD
(n = 3,397)
SD
(N = 9,220) M
Linked Sample
Full Sample
TABLE 1 Variable Definitions and Descriptive Statistics (unit of observation: worker)
175
Ln household wage income Northeast Midwest South Local unemployment rate (%)
Self-employed Small establishment
6.46
10.30 0.192 0.23 0.35
Natural log of household income = 1 if worker resides in Northeast census region = 1 if worker resides in Midwest census region = 1 if worker resides in South census region County-level unemployment rate for January 1996
0.5
0.52
3.73
1.08 0.39 0.42 0.48
0.34
0.13
= 1 if worker reports self-employment = 1 if worker is employed at an establishment with fewer than 50 workers
6.53
10.20 0.17 0.24 0.35
0.5
0.09
3.63
1.05 0.37 0.42 0.48
0.5
0.29
176 9,220 .14
.008 .022* .0003 .0004 .007 .001 .013 –.022 .001 –.009** —
.020* .0002 –.018* –.008 –.007** — 9,220 .13
.014 .201** .013 .039** .003 .039** .0000.0004**
Marginal Effect
.181** .038** .030** –.0004**
SE
Marginal Effect SE
With Income Marginal Effect
9,220 .20
9,220 .10
.01 .026** .009 .032** .0004 –.0005 .0004 .0003 .008 –.027** .008 .012 .015 .003 .015 –.045** .002 –.006** .002 –.008** — .197** .016
Marginal Effect
9,220 .15
.012 .034** .0005.0006 .008 –.013 .017 –.022 .002 –.005 — .213**
.012 .0005 .008 .018 .002 .018
.020 .018 .004
SE
With Income
.017 .101** .017 –.089** .004 .018** .0000.0002**
SE
Without Income
All Household Members Covered under Employer Insurance (unconditional on offer)
.016 .100** .019 .202** .015 –.015 .016 –.021 .003 .023** .004 .036** .0000 –.0003** .0000 –.0004**
SE
Without Income
Worker Is Covered by Employer Insurance (unconditional on offer)
Note: Model specification also includes region dummies and a constant term. * Significant at p < .05. ** Significant at p < .01.
N Pseudo-R2
Two-earner Married Age Age-squared .0000 Education Education-squared Male Nonwhite Unemployment rate Ln household wage income
Marginal Effect
Household of Worker Is Offered Employer Insurance
TABLE 2: Basic Dimensions (marginal effects reported with standard errors)
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higher income and so coverage is more affordable. When we estimate these models and include the natural log of household wage income, we find that, while income is positively associated with coverage, having two earners is still associated with 10-point increases in the probabilities of worker coverage and complete household coverage.9 In addition to the basic dimensions of offer and coverage, we estimate a set of models to better understand how the range of choices available to the household varies by the number of earners. As Schone and Cooper (2001) reported, plan choice is positively associated with greater satisfaction. Only at the household level is it possible to get a complete picture of the set of choices available to the decision-making unit. As one might expect, we find that having two earners in a household increases choice. These results are reported in Table 3. To begin, we find that workers in these households have an average of 1.29 more plans available from which to choose relative to single-earner households. Furthermore, two-earner households also have more choice with respect to plan type. In recent years, growing dissatisfaction with the limited provider access of managed care organizations has led some employers to modify their health benefits, offering less-restrictive products that allow greater consumer flexibility as well as offering a choice of plans that appeal to a heterogeneous workforce. As another dimension of choice set generosity, we examine the types of plans from which workers and their families can choose. In the MEPS-IC, plans are classified into one of three categories corresponding to provider organizational structure. These categories include exclusive provider organizations (e.g., HMOs), any provider organizations (e.g, conventional), and organizations that are a mixture of exclusive and any providers (e.g., preferred provider organization [PPO] or point of service [POS]). Using this information, we define a variable corresponding to having a plan available with a freedom of choice of provider. Here, any provider plans and those with a mixture of providers are classified as providing “freedom of choice.” Our results reveal that being a worker in a two-earner household is associated with a 22-point increase in the probability of having a plan with a freedom of choice of provider, relative to being a worker in a single-earner household. The affordability of employer-based coverage represents our last dimension of generosity. To the extent that compensating differentials in wages cannot be offset at the individual level, then one can consider the out-of-pocket contribution associated with employer health insurance to be a metric for choice set generosity. We examine this using the minimum out-of-pocket contribution (across all offered plans) for family coverage for those workers in households that are offered employer health insurance. Our results show that
178 3,397 .08
1.29** 0.377 0.349** –0.004** –0.171 0.022** –0.490** 0.217 –0.096**
.388 .301 .061 .0008 .189 .008 .153 .314 .026
.219** .049* .042** –.0005** .021 .0005 –.021 –.031 –.007* 3,397 .15
Note: Model specification also includes region dummies and a constant term. * Significant at p < .05. ** Significant at p < .01.
N R2
Two-earner Married Age Age-squared Education Education-squared Male Nonwhite Unemployment rate
.027 .025 .006 .0000 .019 .0008 .015 .026 .003
SE
Marginal Effect
Marginal Effect
SE
Household of Worker Has Plan with Freedom of Choice of Provider
Number of Plans Available to Household of Worker
1,962 .06
–216.91** –120.78 –33.98 0.360 –115.43* 3.683 –95.87* –184.49** –2.07
Marginal Effect
80.99 80.66 21.64 0.26 58.97 2.345 48.70 70.77 9.292
SE
Minimum Out-of-Pocket Contribution— Family Coverage
TABLE 3: Choice Set Generosity Dimensions (marginal effects reported with standard errors)—Insurance Component Sample
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a worker in a two-earner household faces a significantly lower minimum annual out-of-pocket contribution of $217. VULNERABLE WORKER EFFECTS The regression results presented above represent the average two-earner effect across household types and for all categories of workers. Next, using equation (2), we measure employer-based health insurance access and choices for part-time workers, the self-employed, and workers in small establishments and how this varies by the number of workers in the household. The main vulnerable worker effects and the two-earner interaction effects are reported in Tables 4 and 5. Other results are available upon request. All three groups of workers are significantly less likely to have access to employer-based health insurance, to be in a household that holds coverage, or to have all household members covered. For vulnerable workers in singleearner households, the negative impact with respect to health insurance access is large. For example, we find that self-employed workers are almost 52 points less likely in probability to be in a household with an offer of employerbased coverage, while part-time workers and workers in small establishments are 47 and 25 points less likely to have access, respectively. These households are also much less likely to have a covered worker or to have coverage for all household members. Part-time workers in single-earner households are 47 points less likely to be covered and 38 points less likely to have all household members covered, with similar magnitudes for self-employed workers. Although workers in small establishments tend to fare slightly better, they are still 29 points less likely to be covered and 27 points less likely to have all household members covered. Our results, however, show a very different picture for vulnerable workers in two-earner households. Specifically, we find large offsetting effects of having a second earner on offers and coverage for part-time workers and workers in small establishments. For example, while households of a part-time worker are 47 points less likely in probability to be offered employer insurance, when there are two earners, there is approximately an 86 percent offset of this effect, as captured by the marginal effect of .399 on the interaction term. For workers in small establishments, nearly 62 percent of the negative impact is offset by having a second earner in the household. It is important to note that our model does not explain why we find such large offsets. It may be, for example, that decisions about hours of work are dependent on access to coverage through a working spouse. These findings highlight the need for researchers to explore the importance of such joint decision making within households and its effect on health insurance access.
180 .020 .165**
.157**
–.466** .361** –.460** .168** –.286**
.048 .036 .028 .047 .016
Marginal Effect
.023
.043 .065 .030 .054 .017 .124** .025
–.392** .310** –.520** .188** –.254**
SE
With Income Marginal Effect
.031 .051 .027 .050 .017
SE
Without Income
Worker Is Covered by Employer Insurance (unconditional on offer)
–.466** .399** –.517** .259** –.253**
SE
Note: The full set of model results is available upon request. * Significant at p < .05. ** Significant at p < .01.
Part-time main effect Part-Time × Two-Earner Self-employed main effect Self-Employed × Two-Earner Small establishment main effect Small Establishment × Two-Earner
Marginal Effect
Household of Worker Is Offered Employer Insurance
.152**
–.378** .267** –.370** .052 –.267**
Marginal Effect
Marginal Effect
.027 .134**
.029
.036 .063 .025 .047 .017
SE
With Income
.027 –.327** .051 .252** .023 –.425** .046 .088 .016 –.245**
SE
Without Income
All Household Members Covered under Employer Insurance (unconditional on offer)
TABLE 4: Basic Dimensions—Main Vulnerable Worker and Two-Earner Interaction Effects (marginal effects reported with standard errors)
181
.246 .839 .248 .589 .282 .760
–1.06
SE
–1.64** 0.458 –2.49** 0.201 –1.80**
Note: The full set of results is available upon request. * Significant at p < .05. ** Significant at p < .01.
Part-time main effect Part-Time × Two-Earner Self-employed main effect Self-Employed × Two-Earner Small establishment main effect Small Establishment × Two-Earner
Marginal Effect
Number of Plans Available to Household of Worker
.166**
–.359** .156 –.448** –.034 –.280**
Marginal Effect
.040
.041 .080 .038 .084 .025
SE
Household of Worker Has Plan with Freedom of Choice of Provider
–74.72
448.26 –7.92 –101.74 75.35 321.34**
Marginal Effect
162.18
232.81 280.53 370.11 600.16 97.53
SE
Minimum Out-of-Pocket Contribution— Family Coverage
TABLE 5: Generosity Dimensions—Main Vulnerable Worker and Two-Earner Interaction Effects (marginal effects reported with standard errors)
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Effects of similar magnitude are found for the probability that the household of a worker is covered by employer insurance. With respect to having all household members covered, the three groups of vulnerable workers are between 27 and 38 points less likely in probability to have all of their household members covered, but roughly 70 percent of this effect is offset for parttime workers, and 57 percent is offset for those working in small establishments when there is a second earner in the household. Our significant, two-earner effects persist with large differences on the margins of choice set generosity between households with two earners and those with one. In these models, the two-earner dummy remains positive, significant, and large even when interactions with part-time, self-employment, and small establishment are included in the model. Households with workers in these subgroups have fewer available plans from which to choose and less variety with respect to plan type. On average, households of a part-time worker or those with a worker in a small establishment are 36 and 28 points less likely in probability to have a plan that allows for freedom of choice of provider, holding everything else constant. While having a second earner serves to mitigate some of the negative impact on choice set generosity, these twoearner effects are not as concentrated in the vulnerable populations as was the case with our basic measures of offer and coverage. The magnitude of the offset that is specific to these populations is somewhat smaller here, largely because these workers are much less likely to be offered coverage in the first place, and much of the two-earner effect on these generosity dimensions is due to the additional choices available to households that have two sources of coverage. Overall, we find that the average effect of having two earners leads to a dramatic improvement both with respect to access and choice set generosity. Furthermore, we find that households with vulnerable workers, including parttime, self-employed, and workers in small firms, tend to fare worse on all dimensions, but that having a second earner serves to mitigate a significant proportion of the negative effects associated with the household having an offer, taking up coverage, and having all household members covered by employer insurance.
POLICY IMPLICATIONS AND FURTHER RESEARCH In recent years, many policy measures have been proposed to reduce the number of working uninsured. For example, two such measures are in the form of tax credits, including refundable, individual tax credits for workers who are not currently offered coverage and tax credits for small employers to
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encourage them to offer health insurance to their workers.10 These and other proposals often target particular categories of workers who are the least likely to have access to their own source of coverage. Yet, as the prevalence of two-earner households increases, it becomes even more critical to consider household access rather than worker access to coverage. Our results illustrate how different the picture looks at the household level. While part-time workers, the self-employed, and workers in small establishments are much less likely to have their own offer of coverage, we find evidence to suggest significant offsets to this negative effect at the household level when there are two earners in the household. Our results suggest the particular vulnerability of single workers and other households with only one earner who have only one potential source of employer coverage. The important function that an additional earner performs in household access to employer insurance also points to the role that household formation and dissolution may play in instigating transitions in and out of private health insurance. Changes in household composition resulting from widowhood, divorce, or separation may eliminate potential coverage sources. A study by the Kaiser Family Foundation (2001) found that women 18 to 64 were much more likely to rely on dependent coverage rather than coverage through their own jobs, making them more vulnerable to being uninsured if they become divorced or widowed. Estimates from our sample of workers in two-earner households reinforce this conclusion. Conditional on having an offer of coverage, 72 percent of women in our two-earner households hold coverage through their own employer compared with 86.3 percent of men. Finally, the large gain in access to insurance that occurs through the eligibility of a household unit for the insurance of either spouse also suggests that additional gains in access might be realized through liberalizing family eligibility restrictions to include other traditionally noneligible household members. Such examples include increasing the eligibility of children until the age of 21, regardless of student status, or expanding coverage eligibility to unmarried domestic partners. Of course, such changes would clearly have important repercussions for the cost of employer-based health insurance, and these issues would have to be taken into account in future public policy evaluation. In this article, we have used the rich data contained in the HC and the linked IC of the 1996 MEPS to document how the access to, and generosity of, employer health insurance differs for workers in single-earner households and those in two-earner households. We find that households with two earners have greater access to employer-based health insurance as well as more generous offerings. Given this result, we believe that it is important for other types of analyses of health insurance, such as those examining demand and
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price sensitivity, to use the household as the unit of analysis. This can provide a more complete representation of the set of options available to the decisionmaking entity since two-earner households may have two potential sources of coverage. A small handful of recent work has taken the first step in addressing these issues (Abraham, Vogt, and Gaynor 2003; Monheit, Schone, and Taylor 1999), but the implications of household-level access to insurance have not yet been fully investigated. Our results also reveal that access to employer health insurance for vulnerable workers in two-earner households is much improved relative to vulnerable workers who are the single earner in their household. Recognizing that household members’ employment decisions may be related to their health insurance options, in future work we will explore whether and to what extent these households may be jointly making labor market decisions that affect their health insurance options.
NOTES 1. This estimate of the two-earner effect could be biased if there are unobservable factors that affect health insurance that are correlated with having two earners in the family that are not controlled for by marital status. We argue that the married dummy controls for most of any selection effect that might be expected. Second, the magnitude of our estimated two-earner effects relative to the effect of the married dummy suggests that any small remaining bias in the two-earner effect is unlikely to change our conclusions. 2. Although other job-related factors may be correlated with health insurance (e.g., industry classification), we choose not to include them for two reasons. First, the industry of workers in the household is likely to be endogenous. Second, our purpose is to estimate an overall, average two-earner effect rather than one that is conditional on industry. 3. While firm size might be preferable in identifying this group, the Medical Expenditure Panel Survey Household Component (MEPS HC) only asks for the number of workers employed at the establishment of the survey respondent. 4. The difference-in-difference in (3) is capturing the same effect as the coefficient on an interaction term in a linear model. Unlike in the linear model, however, the main effect of part-time (PT) need not be equal when evaluated at two-earner = 1 and two-earner = 0, and the effect of two-earner need not be equal when evaluated at PT = 1 and PT = 0. “Canned” marginal effect calculations of interaction terms in nonlinear models in conventional software packages do not capture the interaction effect of interest but instead compute (P (PT × two-earner = 1) – P (PT × two-earner = 0)). See Ai and Norton (2003) for discussion. 5. The Insurance Component is not a public-use file but is available for use at the Center for Cost and Financing Studies (CCFS) Data Center at the Agency for Healthcare Research and Quality (AHRQ) in Rockville, Maryland. In June 2003, more recent
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years of linked MEPS data were made available for use at the AHRQ Data Center. However, the survey design and sampling frame were altered after 1996. In addition to a smaller sample size, employers were surveyed about insurance offerings without specific indication of availability to the surveyed jobholder. 6. Due to the extent of nonresponse bias, the linked sample, unlike the HC sample, is not nationally representative. To evaluate differences between workers in households that linked versus those that did not, we estimated a binary probit model and found that those who linked were older, more educated, less likely to be a member of a two-earner household, less likely to be married, more likely to be a part-time worker or government employee, and less likely to be self-employed or work for a small establishment. (We imposed the condition that both workers in two-earner households had to link to be included in the linked sample.) Results are available from the authors by request. 7. We obtained the unemployment variable from the Bureau of Labor Statistics and had it merged onto the confidential MEPS data file at the AHRQ Data Center in Rockville, Maryland. 8. For the basic dimensions of employer insurance across all worker categories, including offer, worker coverage, and coverage of all household members, we estimated the model using both the full sample and the IC sample and find qualitatively similar results. 9. Estimating the models including a variable to control for the presence of children does not affect the magnitude of our estimates on the two-earner dummy. 10. The first proposal is from the president and calls for a refundable tax credit to individuals for 90 percent of premiums up to a cap of $1,000 for individuals and $3,000 for families. The second is the Health Insurance Access Act of 2002, which would create a tax credit of 30 to 50 percent for health insurance for small firms with lowwage workers to provide them with an incentive to offer health insurance (Lambrew and Garson 2003).
REFERENCES Abraham, Jean M., William B. Vogt, and Martin S. Gaynor. 2003. Household demand for employer-based health insurance. Working paper, H. John Heinz III School of Public Policy and Management, Carnegie Mellon University. Agency for Healthcare Research and Quality. U.S. Department of Health and Human Services. 2001. Medical Expenditure Panel Survey: Household Component. http:// www.meps.ahrq.gov/data_pub/hc_toc.htm. Ai, Chunrong, and Edward C. Norton. 2003. Interaction terms in logit and probit models. Economics Letters 80 (1): 123-29. Bureau of Labor Statistics, U.S. Census. 2001. Employment characteristics of families in 2000. ftp://ftp.bls.gov/pub/news.release/History/famee.04192001.news. April 19, 2001. Kaiser Family Foundation. 2001. Women’s health insurance coverage. http://www. kff.org/content/2001/6000/pub6000.pdf.
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Lambrew, Jeanne, and Arthur Garson Jr. 2003. Small but significant steps to help the uninsured. http://www.cmwf.org. Medical Expenditure Panel Survey. 1996. Full year consolidated data file. PUF documentation files. March 2001. Agency for Healthcare Research and Quality, Rocville, MD. http://www.meps.ahrq.gov/Puf/DataResultsDoc.asp, 2005. Monheit, Alan C., Barbara Steinberg Schone, and Amy K. Taylor. 1999. Health insurance choices in two-worker households: Determinants of double coverage. Inquiry 36:12-29. National Center for Health Services Research and Health Care Technology Assessment. 1987. National Medical Expenditure Survey, 1987: Institutional population component [Computer file]. Rockville, MD: Westat, Inc. [producer], 1987. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 1990. Schone, Barbara Steinberg, and Philip Cooper. 2001. Assessing the impact of health plan choice. Health Affairs 20 (1): 267-75. Schur, Claudia, and Amy K. Taylor. 1991. Choice of health insurance and the twoworker household. Health Affairs 10 (1): 155-63.
