Why is there state variation in employer-sponsored insurance?

Using the National Survey of America's Families in 1997 and 1999, we investigate the sources of variation in employer-sponsored health insurance across states. We find that demographics and family characteristics (such as race/ethnicity and citizenship status), individual employment characteristics (such as firm size and labor-force attachment), and local labor market characteristics (such as unionization) consistently explain the relative position of all of the states with either high or low rates of employer coverage. Income plays a smaller role in explaining the state variation but is still an important determinant, especially among states whose average income is far from the national average.