NewsRising Healthcare Insurance Costs Contribute to Wages Stagnation and Income Inequality

Rising Healthcare Insurance Costs Contribute to Wages Stagnation and Income Inequality

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A recent study published in the Journal of the American Medical Association reveals that escalating healthcare insurance costs are placing a financial burden on employers, resulting in reduced wages and exacerbating income inequality. The research, conducted by the Friedman School of Nutrition Science and Policy at Tufts University in Medford, MA, highlights the concerning trend where healthcare benefits provided by employers have outpaced workers’ wages since the late 1980s.

Analyzing national insurance data from individuals covered by employer-sponsored family health insurance plans between 1988 and 2019, the researchers utilized information from the Kaiser Employer Health Benefits Survey and the Bureau of Labor Statistics’ Consumer Expenditure Survey. This data was then combined with information on family earnings and federal payroll taxation rates from the Census Bureau.

The study reveals that, by 2019, the net effect of increasing healthcare premiums was an average reduction of approximately $9,000 per year in wages. The findings emphasize that employers are allocating more funds to insurance premiums instead of channeling those resources into workers’ wages.

Dariush Mozaffarian, PhD, senior author of the study and director of the Food is Medicine Institute at the Friedman School, expressed concern about the hidden costs associated with rising premiums, particularly impacting people of color and low-wage workers. He noted that this phenomenon contributes to slower wage growth, increased insurance premium burdens, and heightened income inequality.

The study highlighted a persistent trend over the 32-year period, noting that healthcare premiums as a percentage of compensation were consistently higher for non-Hispanic Black and Hispanic families compared to non-Hispanic white families. By 2019, these premiums represented 18.5% for Asian families, 19.2% for Black families, and 19.8% for Hispanic families, in contrast to 13.8% for white families.

Lower-wage workers bore a disproportionate burden, with premiums as a percentage of compensation reaching 28.5% for families in the 20th percentile of earnings, compared to 3.9% for families in the 95th percentile.

Kurt Hager, PhD, the study’s first author, emphasized the tangible impact of a $125,000 wage loss over three decades due to rising premium costs, particularly affecting economically disadvantaged families. The study underscores the urgent need for a shift in US healthcare policy to prioritize prevention and lower-cost care, with Mozaffarian stating, “Health insurance should help people, not hold them back, or push them further behind when it comes to wages and income equality.”

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