HR Views

Increasing Healthcare Premiums Chip Away at Employees’ Paychecks

As healthcare premiums continue to soar, HR professionals often find themselves grappling with employees’ concerns about the increasing costs. Addressing these queries can be challenging, but recent research sheds light on the significant impact rising health insurance premiums have on workers’ earnings.

According to an analysis published in the Journal of the American Medical Association (JAMA) Network, US families covered by employer-sponsored insurance experienced an average loss of $125,340 from 1988 to 2019 due to escalating healthcare premiums. Ezekiel Emanuel, co-director at the University of Pennsylvania’s Healthcare Transformation Institute and co-author of the study, highlights the pressing issue of healthcare inflation eroding wages.

The analysis, drawing from federal surveys such as the Census Bureau’s Current Population Survey and the Kaiser Employer Health Benefits Survey, unveils stark disparities in the impact of healthcare inflation. Over the 32 years examined, the portion of workers’ total compensation allocated to health insurance surged to over 15%, doubling from under 8%. Consequently, the average worker now spends approximately $9,000 more annually on health insurance compared to the early ’90s—an enormous chunk of household income.

The burden of healthcare inflation disproportionately affects Black and Hispanic families, with the analysis revealing greater earnings losses for minority households. While white families lost 7.5% of their earnings to rising premiums by 2019, Black and Hispanic families experienced higher losses at 9.6% and 9.3%, respectively. Emanuel attributes this to the wage disparity, noting that uniform premium charges disadvantage lower-income workers.

The Center for American Progress underscores the correlation between workforce demographics and healthcare utilization, indicating lower uptake among firms with a substantial number of low-wage employees compared to those with higher-wage workers.

To alleviate the financial strain on employees, employers have explored alternative strategies such as cost-management initiatives targeting major cost drivers like chronic medical conditions. Nonetheless, HR professionals can consider additional measures, including income-based health insurance premiums. Companies like General Electric (GE), Pitney Bowes, News Corp., and JPMorgan Chase have implemented tiered premium structures based on salary bands, a move aimed at easing the burden on lower-wage workers. However, this approach remains relatively rare, with only about 10% of large firms offering such programs to mitigate healthcare premium disparities.

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