| The Comptroller's Report
Nancy Wyman - State Comptroller
Economic Downturn May Erode Recent Health Coverage Gains
In the past several years Connecticut has experienced a decline in the
percentage of residents who lack health insurance. This trend has largely been
due to a strong state economy and low levels of unemployment. Until recently,
Connecticut's tight labor market encouraged more employers to offer health
benefits to help attract and retain qualified workers.
- When measuring the uninsured population, health care analysts often focus
on the non-elderly population (those under age 65) since virtually everyone
age 65 and above is covered by Medicare.
- Using this approach, the Employee Benefit Research Institute estimated that
9.3 percent of Connecticut's non-elderly population was uninsured in 2000
compared to 11.3 percent in 1999.
- Connecticut's rate of non-elderly uninsured residents (9.3 percent) was
lower than both the national average (15.8 percent) and New England regional
average (10.2 percent).
- However, two of the six New England states fared better than Connecticut on
this measure - Rhode Island at 6.9 percent and New Hampshire at 7.8 percent uninsured.
- Most non-elderly Americans receive their health coverage through the
workplace - either their own employer or a family member's. The rest with
insurance are covered either through public programs, including Medicaid, or
by purchasing coverage as individuals in the private marketplace.
- Connecticut residents have traditionally relied even more heavily on
employer-based coverage than the New England region or the nation as a whole.
As the accompanying table indicates, that trend continued in 2000.
Health policy analysts are predicting a rise in the uninsured population in
the near term, based primarily on the convergence of two trends. The first is
the weakening economy, both on the state and national levels. The current
recession has produced a significant increase in the jobless rate. Studies of
past recessions have shown that the loss of a job often means losing health
The second trend is rising health care costs. Medical inflation has been
increasing sharply in recent years after a period of relative stability in the
mid 1990s. As health benefits get more expensive, employers tend to shift more
of the cost onto employees and some may stop offering coverage altogether. For
their part, workers - especially low wage earners - are less likely to
accept offers of coverage when costs rise because they cannot afford the
employee portion of the insurance premium.
A recent survey by the human resource consulting firm William M. Mercer
indicates that health benefit costs continued to increase for employers in 2001
and show no sign of slowing. More than 2,800 employers participated in the firm's
nationwide survey and the following are among the findings:
- The average cost of health benefits rose 11.2 percent in 2001 for employers
with ten or more workers. This increase, which comes after an 8.1 percent rise
in 2000, compares to a 2.1 percent general rate of inflation.
- The forecast for 2002 is no better. Employers expect their health benefit
costs to rise by an average of 12.7 percent, with some predicting increases of
20 percent or more.
- In 2001, smaller employers began shifting more costs onto their workers. In
2002, it appears large employers will do so as well. Forty percent of large
employers responded that they would require workers to pay a higher percentage
of the total cost in the upcoming year.
- Health benefit costs varied widely by region. In 2001, the overall average
cost per employee was highest in the Northeast ($5,469), followed by the
Midwest ($5,088), the South ($4,643) and the West ($4,538).
Despite the recent decline in Connecticut's uninsured population, many
state residents still lack health coverage and the vast majority are from
working families. In addition, the downturn in the economy and rising health
costs will likely erode health coverage levels in the near future.