Had Health Insurance Costs Remained Stable, Wages for the Average Family Could Have Increased by Nearly $9,000 a Year
A recently published study in the medical journal JAMA Open Network analyzed the cost of employer-sponsored health insurance in the U.S. It concluded that had health insurance costs remained stable, wages for the average family could have increased by nearly $9,000 a year.
That’s a big chunk of change. And lower-paid workers had an even larger percentage of their compensation eaten-up by health insurance costs, so they would have gained even more.
Simply put, Dr. Dariush Mozaffarian, a cardiologist and senior author on the study, said in a news release that “Employers are spending more on insurance premiums instead of that money going to workers as wages.”
The study compiled national insurance data from individuals with employer sponsored health insurance from 1988 through 2019. In 1988, health insurance premiums averaged 7.9% of total worker compensation. By 2019, the percentage has risen to 17.7%.
If costs had not jumped so high, $8,774 more would have been available to put toward annual wages.
The Future Outlook
According to consulting firms Aon, Mercer, and Willis Towers Watson (WTA), healthcare cost increases ranging between 5.4% to 8.5% are expected in 2024. Typical annual increases have hovered in the 3-4% range in past years, according to Mercer. But 2023 costs were already 7% higher than in 2022, so an additional big hike this year will make it especially difficult to rein in costs.
Health insurance plans are expensive. Workers typically foot some of the bill for their plan which can amount to thousands of dollars a year in out-of-pocket expenses. Increasingly, workers are struggling to afford their share of premiums, copays and deductibles. Often this leads to going without insurance, needed care, or amassing debt.
In a survey conducted by the Commonwealth Fund, 3,032 individuals who had employer-sponsored healthcare in 2023 answered a series of questions about their healthcare finances. 43% reported it was very or somewhat difficult to afford their healthcare. 30% were paying off debt from medical or dental care. 29% said their healthcare costs had made it harder for them to afford food or pay for common household expenses such as electric or heating bills.
What’s Driving Costs?
People who put off care during the pandemic are now seeking care, and sometimes the chronic conditions they delayed getting care for will cost more to treat. Additionally, newer and more expensive specialty drugs, particularly for treating cancer, rheumatoid arthritis, MS, cystic fibrosis, and diabetes are being utilized in greater numbers, which increases the overall cost for prescription drugs.
While inflation is currently tame relative to the highs experienced in 2022-23, contracts between insurers and providers are often negotiated years in advance. New contracts will likely reflect an effort by providers to recover increased costs incurred during the inflation upswing.
What Should Change?
The study in JAMA Open Network doesn’t assign blame to any party, and instead points to the importance of changing U.S. health policy to focus on prevention and lower costs. Indeed, healthcare as it exists in the U.S. today is terribly complex, and many different parties are responsible for a share of this high-cost system.
AEPC was born when labor unions and management worked to find a way to do exactly what the study authors recommend: lower costs for high quality care and promote wellness. Working within the imperfect U.S. health system, AEPC is proud to offer prescription drug plans and other programs that negotiate the best possible price for a quality plan. We do this with little fanfare or attention, but do it we must until a better system comes into being.
What Can You Do?
Stay in your union job or organize a union where you work! There’s a union advantage when it comes to health insurance coverage and access to care. An article in the International Journal of Health Economics Management cites data that 98% of union workers have health insurance coverage, compared to 86% of those without a union. The same article quantified that union workers pay a lower share of out-of-pocket expenses, and that they are more likely to have a regular doctor.
