Study links rising health care costs and income disparities

Health care affordability and income inequality are two of the major challenges facing U.S. workers. A new study reported by JAMA Network suggests that the two may be related.

“In all 32 years of the study, health care premiums as a percentage of compensation were significantly higher for non-Hispanic Black and Hispanic families than for non-Hispanic white families,” the report said. “This study suggests that increasing health insurance premium costs are likely associated with decreased earnings and increased income inequality, including by race and ethnicity, among U.S. families receiving employer-sponsored health insurance and are meaningfully associated with wage stagnation.”

Increasing health insurance 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. In addition:

• Racial and ethnic earning disparities associated with health insurance premium growth have increased over time.
• The relative value of an employer-sponsored family plan depends partly on household size. Many plans have a set rate for families regardless of household size, meaning that larger households may receive a relatively better value on their premiums than smaller households that are paying similar costs. 
• The loss of $9,000 in 2019 wages because of premium increases since 1989 has real consequences for families, especially those with economic insecurities. Increasing premium costs are particularly problematic for lower-paid workers, which could place their families at greater risk of economic instability.
• This study builds on existing literature showing that increasing premium costs are associated with wage stagnation. Faced with excessive premium growth, some employers are responding by pivoting to greater employee cost sharing through high-deductible plans, reducing plan generosity or shifting employees to part-time work.
• Few employer-sponsored plans vary health care premium costs by the wage level of the employee, making increasing premiums more burdensome for lower-wage workers.
• Finding that lower-wage workers contribute more to premiums as a percentage of their compensation aligns with evidence that, across the entire U.S. health care system, the burden financial burden is greater for lower-income than higher-income households. 

Related: Employers seek to balance employee needs, health care costs as they look to future

“Our results depict the hidden costs of increasing health insurance premiums for the U.S. worker — less opportunity for wage growth and a heavier burden of health insurance premiums on lower-paid workers and on Black and Hispanic workers,” researchers concluded. “Our analysis suggests a need for future research and for a corresponding U.S. health care policy to examine the role that increasing health care premiums play in stagnating employee wages and increasing income inequality.”