Premium hikes outpacing employee wages, especially for Blacks, Hispanics
Disparities were found along racial and ethnic lines and by wage level, further stressing those with economic insecurities.
Photo: Luis Pelaez Inc/Getty Images
Employee wages have been unable to keep pace with the rising costs of premiums in employee-sponsored coverage, and the disparity is having an outsized effect on Black and Hispanic employees in particular, a new study in JAMA Network Open has found.
Over more than three decades, from 1988 to 2019, health insurance premiums increased from 7.9% of compensation (wages plus premiums) to 17.7% of compensation for families with employer-sponsored insurance (ESI). Black and Hispanic families with ESI lost a higher percentage of their wages than white families to increasing healthcare premiums.
By 2019, premiums as a percentage of compensation were 19.2% for Black families and 19.8% for Hispanic families, while they were only 13.8% for white families.
The study attributed this in part to structural racism across the U.S. economy, including in education and hiring, meaning a larger proportion of Black and Hispanic workers have been employed in lower-paying jobs, even among workers with employer insurance. By receiving lower earnings historically, Black and Hispanic households shoulder a greater proportion of the increase in healthcare premiums as a percentage of their compensation.
"Thus, ESI may partially maintain interconnected historical inequities surrounding structural racism, earnings, and healthcare use," authors wrote.
WHAT'S THE IMPACT?
There were also large disparities found in healthcare premiums by wage level. In 2019, premiums as a percentage of compensation represented 28.5% of compensation for families at the 20th percentile of earnings, compared with only 3.9% for families at the 95th percentile of earnings – a ninefold difference in the proportion of premiums as a percentage of compensation.
The increasing premiums since 1988 contributed to nearly $9,000 in annual lost earnings in 2019 and $125,000 in cumulative median lost earnings over the 32-year period.
That loss has real consequences for U.S. families, authors said, especially for those with economic insecurities. For example, one-third of U.S. adults can't afford a surprise $400 expense, and one in five households has medical debt, with a median debt of $2,000. Increasing premium costs are particularly problematic for lower-paid workers, which could place their families at greater risk of economic instability.
The study also builds on existing research showing increased premium costs are linked to wage stagnation. One previous study showed that a 10% increase in health insurance premiums reduced wages by 2.3% and that about two-thirds of health insurance-premium growth was compensated through lower wages. Another analysis concluded that increasing healthcare costs from 1999 to 2009 caused families to lose an estimated $5,600 per year in wages by 2009.
THE LARGER TREND
Family premiums for employer plans will likely rise an average of about 7% this year. A recent KFF analysis predicted that premiums will average $23,968 and that employees will contribute $6.575 toward that premium on average – a $500 increase year-over-year.
On average, covered workers contributed 17% of the cost of single coverage and 29% of the cost of family coverage.
Both single and family premiums increased faster in 2023 than in 2022 – 2% vs. 7%, and 1% vs. 7%, respectively. For comparison, the inflation rate over the past year was 5.8% and wage growth was 5.2%. During the past five years, the average premium for family coverage has risen 22% – an increase in line with inflation (21%) and wage growth (27%).
The average single premium was higher for covered workers in small firms ($8,722) than for those in large firms ($8,321), whereas the average family premium was similar for covered workers in small and large firms. Average premiums for both single and family coverage were higher for covered workers in PPOs and lower for covered workers in HDHP/SOs, compared with the overall average for all firms.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
