Health insurance premiums are eating into paychecks at an alarming rate, with a heavier burden increasing inequality by race and ethnicity, a new study finds.
Premiums do not vary by income, in general, meaning that lower-wage workers pay a bigger percentage of their paychecks than do higher-wage workers, according to the study, “Employer-Sponsored Health Insurance Premium Cost Growth and Its Association With Earnings Inequality Among US Families,” by Kurt Hager, PhD, MS; Ezekiel Emanuel, MD, PhD; and Dariush Mozaffarian, MD, DrPH, which was published in JAMA Network Open.
“From 1988 to 2019, health insurance premiums increased from 7.9% of compensation (wages plus premiums) to 17.7% of compensation for US families with [employer-sponsored insurance],” the authors write.
“Moreover, Black and Hispanic families with [employer-sponsored insurance], lost a higher percentage of their wages than White families with [employer-sponsored insurance], to increasing health care premiums. By 2019, health care 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.
“We also observed large disparities in health care premiums by wage level. In 2019, health care 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 9-fold difference in the proportion of health care premiums as a percentage of compensation. The 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.”
The average annual premium for employer-sponsored health insurance in 2023 was $8,435 for single coverage and $23,968 for family coverage, a Kaiser Family Foundation study recently said, adding: “Over the last five years, the average premium for family coverage has increased by 22% compared to an 27% increase in workers’ wages and 21% inflation.”
Racial and ethnic disparities increase
The JAMA study also found that racial and ethnic earning disparities increased over time, with lower-paid workers subsidizing the insurance coverage of higher-paid workers.
“Due to long-standing structural racism across the U.S. economy, including in education and hiring, a larger proportion of Black and Hispanic workers than White workers have been employed in lower-paying jobs. This pattern holds true even among workers with [employer-sponsored insurance], as our analysis found. By receiving lower earnings historically, Black and Hispanic households shoulder a greater proportion of the increase in health care premiums as a percentage of their compensation, a trend that persisted throughout all 3 decades of our analysis.”
“These findings are consistent with recent polling in which 60% of Black adults and 65% of Hispanic adults reported difficulty in affording health care costs compared with 39% of White adults.”
The problem does not stop with premium payments, the study found: Other costs also placed a heavier burden on lower-wage workers.
“Faced with excessive premium growth, some employers are also responding by pivoting to greater employee cost sharing through high-deductible plans, reducing plan generosity, or by shifting employees to part-time work,” the authors wrote.
“Our findings that lower-wage workers contribute more to [employer-sponsored insurance] premiums as a percentage of their compensation aligns with evidence that, across the entire U.S. health care system, the burden of health care financing is greater for lower-income than higher-income households.”
