Health Insurance Exchanges Will Go a Long Way Toward Fixing the Broken Health Care System

The non-elderly population across the country relies on employer-sponsored health insurance (ESI) as their primary form of health coverage. In eleven of the last twelve years, however, ESI coverage has declined. Across the country, on average, ESI coverage for the under-65 population fell 10.8 percentage points from 2000 to 2012. Translated into raw numbers, if the ESI coverage rate had not declined over this period, 29 million more Americans would be covered today by their employers. Twenty-two states experienced losses in excess of 10 percentage points over the period. The largest declines in coverage occurred in Nevada, Michigan, Georgia, Ohio, Wisconsin, and Indiana, each with losses of at least 13 percentage points.

As a result of these losses, the average coverage rate in 2012 was down to 58.4 percent. The map below compares ESI coverage for the entire under-65 population across states in 2011/2012.1 Massachusetts has the highest rate of ESI coverage at 70.8 percent. It is followed by New Hampshire (70.0 percent), Connecticut (69.7 percent), Minnesota (69.0 percent), North Dakota (67.6 percent), and Maryland (67.3 percent). In contrast, less than half of New Mexico’s non-elderly population has ESI, at 47.2 percent.


Employer-sponsored health insurance coverage by state, population under 65 years old, 2011–2012

State ESI Coverage
Alabama 57.9%
Alaska 57.0%
Arizona 54.8%
Arkansas 50.1%
California 52.6%
Colorado 61.4%
Connecticut 69.7%
Delaware 64.4%
District of Columbia 57.6%
Florida 51.8%
Georgia 54.5%
Hawaii 65.9%
Idaho 56.7%
Illinois 60.8%
Indiana 63.0%
Iowa 64.5%
Kansas 59.9%
Kentucky 57.5%
Louisiana 53.0%
Maine 60.9%
Maryland 67.3%
Massachusetts 70.8%
Michigan 62.5%
Minnesota 69.0%
Mississippi 53.7%
Missouri 60.6%
Montana 51.5%
Nebraska 63.0%
Nevada 56.4%
New Hampshire 70.0%
New Jersey 66.0%
New Mexico 47.2%
New York 59.6%
North Carolina 55.9%
North Dakota 67.6%
Ohio 61.4%
Oklahoma 54.0%
Oregon 57.1%
Pennsylvania 64.6%
Rhode Island 62.6%
South Carolina 56.8%
South Dakota 59.0%
Tennessee 56.0%
Texas 52.1%
Utah 66.3%
Vermont 60.9%
Virginia 64.0%
Washington 59.3%
West Virginia 59.2%
Wisconsin 64.7%
Wyoming 61.1%
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Source: Author's analysis of Current Population Survey Annual Social and Economic Supplement microdata

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These huge losses almost surely explain the increasing demand for health reform that characterized the years leading up to the passage of the ACA, and highlight why health reform was so important. The fact is the employer-based health insurance system was fraying rapidly in the decade before health reform was implemented. Even before the ACA’s implementation, many of those losing ESI found shelter in public insurance, which disguised the precipitous drop in employer coverage. Indeed, from 2000 to 2012, public insurance, primarily in the form of Medicaid and CHIP, helped counteract the erosion in employment-based coverage and is the only reason why the uninsured rate did not rise one-for-one with the fall in ESI. However, many Americans, particularly those of working age, are still falling through the cracks. Fortunately, once the (admittedly too large) kinks are worked out, the health insurance exchanges created under the ACA will make it easier and more affordable for Americans to secure and maintain health insurance coverage, even if ESI continues the decline that has characterized the last decade.


1. Because of sample size requirements, I combined two years of data 2011 and 2012.