Recession Takes a Toll on Health Care Benefits

By Oriane Casale
March 2010

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Only about half the job vacancies in the second quarter last year included benefits, compared with more than 80 percent five years earlier.

The Minnesota Job Vacancy Survey is telling a story worth noting about employer-offered health benefits during the 2008-09 recession. Overall, job vacancies were less likely to come with employer-offered health benefits during fourth quarter 2008 and second quarter 2009 than at any time since 2002, when we started asking this question on the survey.

While most trends in employer-offered health benefits have not changed, one change — the size of employers with job vacancies—is having a surprisingly big impact.

About 49 percent of the 31,400 job vacancies in Minnesota during second quarter 2009 included health care benefits. This is down from a high of 82 percent during both second and fourth quarters of 2004. This indicates that health care benefit offers are highly sensitive to labor market conditions.

Most patterns in employer-offered health care benefits have remained fairly stable over the eight-year period, according to Job Vacancy Survey results. First, full-time job vacancies are about twice as likely as part-time job vacancies in Minnesota to include an offer of health benefits. This remained true during the 2008-09 recession. 

Second, certain industries are far more likely to offer health benefits than others. For example, just over 75 percent of job vacancies in the following industries historically have included an offer of health benefits: finance and insurance; information; real estate, rental and leasing; and utilities. On the other hand, the following industries historically have been much less likely to offer health benefits: accommodation and food services; retail trade; and arts and entertainment.

Third, the larger the employer, the more likely that employer is to offer health benefits as part of a compensation package. In fact, since 2005, 95 percent of all full-time job vacancies at firms of 250 or more employees offered health benefits. At firms of between 50 and 249 employees, more than 89 percent of job vacancies included health benefits. At the smallest firms — those with fewer than 50 employees — only 73 percent of all full-time job vacancies came with an offer of health benefits.

While these three patterns have changed little over time, two shifts during the 2008-09 recession are affecting the overall level and percentage of job vacancies with employer-offered health insurance. First, the largest employers have reported a smaller share of job vacancies during the recession than during previous quarters. Only 19 percent of all job vacancies and 22 percent of all full-time job vacancies were reported by the largest employers during the second quarter of 2009, down from 28 and 30 percent, respectively, during the second quarter of 2007. With a smaller share of vacancies coming from this group of employers, a correspondingly smaller share of vacancies overall come with employer-offered health insurance.

On the flip side, job vacancies at the smallest firms account for a much higher share of all vacancies. During second quarter 2009, 50 percent of all vacancies and 51 percent of all full-time vacancies were reported by the smallest firms. Not only are these firms the least likely to offer benefits, they are the most sensitive to economic and labor market conditions. During normal labor market conditions, more than 70 percent of full-time vacancies in these small firms came with health care benefits. By second quarter 2009, however, only 58 percent offered health insurance.

Overall, health benefits offerings are taking a hit during the current recession. Job Vacancy Survey findings show two major reasons for this. First, there are fewer jobs available with large employers, who are most likely to offer health benefits as part of pay packages. Second, fewer smaller employers are offering health benefits than at any time since we’ve tracked this information starting in 2002.

As hiring at larger firms picks up, these trends are likely to shift back. Another factor to consider is the impact that federal health care legislation might have on the Minnesota picture. 

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