Rising Health-Insurance Costs Are Eating Into Employees' Paycheck GainsBy
Premium increases surpass rise in wages, inflation, study says
Workers being asked to shoulder a growing share of cost burden
Rising health-care costs are eating up the wage gains won by American workers, who are being asked by their employers to pick up more of the heftier tab.
The average worker is shelling out $5,714 for a family health-insurance plan this year, 30 percent of the total $18,764 cost, according to an annual study from the Kaiser Family Foundation and the Health Research & Education Trust released on Tuesday. Five years ago, workers shouldered $4,316 of the $15,745 cost, or 27 percent.
The cost of buying health coverage at work has increased faster than wages and inflation for years, pressuring household budgets. The squeeze comes as debate in Washington has focused on the smaller individual insurance market reshaped by the Affordable Care Act, which is the target of a renewed repeal effort in the Senate.
Over the past five years, premiums for an employer-provided family insurance plan have climbed 19 percent, while worker pay increased 12 percent, data from Kaiser and the federal government shows. The Labor Department’s consumer-price index, the most widely watched U.S. price gauge, climbed 6 percent in that time.
About 151 million Americans under age 65 get health insurance through their employers, making such plans the largest source of coverage in the U.S. About 18 million people buy insurance on the individual market.
At Steve Reiff Inc., Controller Eric Trump has watched health costs climb for 18 years. The Indiana-based company, which sandblasts and paints cement mixers and other heavy machines, switched in 2012 to plans that require workers to spend more of their own money upfront to hold down costs.
Deductibles in the company’s health plan this year are $5,950 for an individual and twice that for a family. Premiums are going up about 11 percent next year, with workers charged $35 a week.
“The costs just keep going up,’’ said Trump, who isn’t related to U.S. President Donald Trump. When the firm switched to the high-deductible plans, employees “weren’t really upset with the company,’’ Trump said. “They were more upset with the situation and how health care is going in general.”
Despite the rapid increase in employee costs, companies may be increasingly constrained in how much of rising health costs they will be able to pass on to workers.
Deductibles, or preset amounts an insured person must spend before their health coverage kicks in, are now an increasingly routine feature of employer-provided plans, and such costs are rising sharply. Eighty-one percent of workers now face a deductible, up from 72 percent in 2012, at an average $1,505 for a single person, up from $1,097 in 2012, according to the Kaiser report. About one in 10 workers has a deductible of at least $3,000.
“For a lot of employees, depending on where they are on the payscale, the potential exposure they have for the out-of-pocket cost is as high as the employer wants to ask them to take on,’’ said Beth Umland, director of research for health and benefits at the consulting firm Mercer.
Actuarial consulting firm Milliman Inc. estimates that taking out-of-pockets costs as well as premiums into account, a family of four will pay $26,944 this year for health care, up 4.3 percent from 2016’s total of $25,826. The 2016 figure represented 44 percent of the median household income of $59,039.
Senator Lamar Alexander, the Tennessee Republican who leads a key health committee that’s been holding hearings on the ACA, wants to shift the focus back to what he sees as the bigger problem.
“For seven years, we’ve been stuck in this partisan stalemate on health insurance,” Alexander said at the start of a recent hearing on the ACA. “We really should have been spending more time on the fundamental problems with the American health care system,” he continued, rattling off statistics on how much of the economy health care now takes up.
In the early 1990s, companies contained costs by moving employees into tightly managed insurance plans, often called HMOs. In 1994, costs even declined, according to Mercer. But the “managed-care revolution’’ ended and costs jumped again, Mercer’s Umland said, as doctors and patients rebelled against the plans’ restrictions.
Brian Marcotte, chief executive officer of the National Business Group on Health, said companies need to keep their health benefits attractive to find and retain workers in a tightening labor market. Employers are increasingly focused on ways to get care for their workers more efficiently, rather than just making them bear more of the cost, he said.
The current pace of cost increases “challenges the overall long-term affordability of health care,’’ Marcotte said. “It does have a compounding effect, and there is a sensitivity to that, and so employers try to do their best to balance how much they think their employees can take, as well as the bottom line.’’
Climbing health-care costs tend to weigh on workers’ wages, rather than corporate profits, said Thomas Buchmueller, a health economist at the University of Michigan’s Ross School of Business.
“When health-care costs go up faster, that really takes a bite out of wages more than profits,” Buchmueller said. “We’re getting more of our compensation in the form of health insurance, and that doesn’t make us feel richer, because you can’t take it to the store. ”