Lewis & Ellis, LLC

Consumers' costs on private health insurance keep rising

Health Care and Health Insurance
by John O'Dell
Recession could lead tens of millions to lose health insurance
Recession could lead tens of millions to lose health insurance

Since the turn of the century, the amount of money Americans contribute to their health care each year has increased dramatically and that trend shows little sign of slowing down. There are many reasons for this issue, such as the rising cost of prescription drugs, treatment, medical devices and so on, but one aspect of higher costs that has become especially prevalent in more recent years is employers' shifting larger and larger shares of those costs onto workers.

This is happening in a number of ways, but one important way to consider this trend taking place is the total amount of money employers contribute to employee health insurance grew from 3.2% of the total GDP to 3.7% between 2000 and 2016, according to analysis from Axios. Meanwhile, the share of the GDP taken up by wages and salaries fell from almost 47% of the GDP to a little more than 43%. At the same time, corporate profits as a share of the GDP spiked from 4.7% to 9.1%.

Put another way, employers are cutting into worker salaries to cover rising health care costs - though not at the same rate at which health care costs are rising - while also pocketing more money themselves. As a result, employees can expect to pay more for their own health insurance - out of salaries that often don't grow at the same rate as inflation - for everything from their monthly premiums to higher deductibles and copays.

A look at the averages
As of March 2019, the average American received compensation totaling $36.77 per hour, of which $25.22 was salary, according to the Bureau of Labor Statistics. The remaining $11.55 was for benefits, which includes but is not limited to health coverage. The median amount paid for health insurance specifically was $3.06 per hour. For someone working 40-hour weeks with no unpaid time off, that amounts to almost $6,365 for the year.

In March 2000, civilian workers earned $21.16 per hour in total compensation, the equivalent of almost $31.50 in 2019 dollars, separate BLS data showed. Of that total, $15.36 was wages and salaries, and $5.80 were for benefits, including $1.09 for health insurance specifically. On an inflation-adjusted basis, that $1.36 per hour is worth about $1.62 today. The outlay adds up to an inflation-adjusted rate of almost $3,370 in employer contributions per year.

Breaking it down
With that in mind, it's worth noting employer contributions to health insurance have certainly outpaced inflation, more or less matching the rate at which health care costs are generally rising. Data from the Peterson-Kaiser Health System Tracker shows that average health costs increased about 88% from 2000 to 2017 - the latest year for which complete statistics were available - but BLS's data suggests employer contributions are up roughly the same amount through 2019, meaning there is a small but growing gap. With wages up 19%, and more costs being shifted onto consumers, employee contributions as a share of their own salaries are even greater.

Viewed another way, the Kaiser Family Foundation noted that average premiums for single coverage in 2018 came in at close to $6,900, and more than $19,600 for family coverage. That was up 3% and 5%, respectively, from 2017, which is not a significant increase in comparison with some of the growth seen in years prior. However, family premiums have spiked 55% since 2008 alone.

Interestingly, premium increases have slowed down significantly since the Patient Protection and Affordable Care Act went into effect in 2010. From 2003 to 2008, premiums spiked 40%, well above both inflation and workers' earnings (17%), KFF found. In the following five-year period - from 2008 to 2013 - premiums increased 29%, and then from 2013 to 2018, they grew just 20%. With inflation and wages in both those periods rising 8% and 12%, respectively, premium increases remain a persistent issue.

Different costs by income level
Of course, the above are all just averages and for those with lower incomes in particular, these shifting costs are particularly onerous. The Health System Tracker recently published findings which showed that, in 2017, the combined cost of premiums and out-of-pocket health expenses for people making less than 200% of the federal poverty line added up to about 14% of their pay. That number fell to 7.9% of people making between 200% and 400% of the FPL, and an average of just 4.5% of pay for people earning at least 400% of the FPL.

As of 2017, the federal poverty level was only a little over $12,000, so people in the lowest-earning group made less than roughly $24,000, and paid $1 of every $7 they earn just for health care, on average.

Consequently, more may need to be done on the part of insurers and employers to find creative solutions that allow people to get the kind of health coverage and care they need without taking up a significant share of their take-home pay. The more flexibility that becomes available to workers on these fronts, the better off they are likely to be in the years ahead.



Consultants to Contact