The family-based nature of employer-sponsored health insurance helps to shield workers and their dependents from the detrimental health insurance effects of a job loss (Simon, 2001).   The recent decline in the availability of dependent coverage at small employers and rising employee contributions at firms of all sizes raise concerns about the availability of such coverage during the recent recession of 2007-2009.  Public coverage, however, has acted as a countercyclical safety net and is credited with stabilizing children’s coverage (Cawley et al 2011). 

 In this paper, we use data from the Medical Expenditure Panel Survey (MEPS) Insurance and Household Components to examine the effects of the recession on dependent coverage from the perspective of employers and families.  We start by using private-sector employer-level data from the 2000-2010 MEPS- Insurance Component to model the effect of rising unemployment rates on employers’ decisions with respect to dependent coverage.  Rising unemployment rates are indicative of a weakened labor market and together with rising health care costs may lead employers to seek ways to reduce their commitment to health insurance, such as reducing the generosity of dependent coverage.  We examine this issue by analyzing the effect of rising unemployment rates on the likelihood that employers offer dependent coverage and on the details of such coverage.  There are a number of mechanisms by which employers can adjust dependent coverage to reduce their health insurance costs.   One such mechanism is to shift employees into plans that cover fewer dependents.  Employers may do this by offering employee-plus-one plans, increasing employee contributions for dependent coverage, and restricting access to coverage for spouses who already have access through their own employer.  We examine the effects of increasing unemployment rates on employers’ decisions to use these mechanisms and investigate differences by firm size and the presence of unionized employees.