The rising cost of health insurance is an ongoing concern in the United States. New research shows that increasing health insurance costs are eating up a growing proportion of worker’s compensation, and have been a major factor in both flattening wages and increasing income inequality over the past 30 years.
In a study from the Friedman School of Nutrition Science and Policy at Tufts University, researchers found that the cost of employer-sponsored insurance (ESI) health care benefits increased much faster than workers’ wages since the late 1980s, and likely reduced wages by an average of about $9,000 per year by 2019. They also found that the percentage of worker compensation going toward premiums was substantially higher for Black and Hispanic workers and lower-income workers, and likely contributed to income inequality.
“Employers are spending more on insurance premiums instead of that money going to workers as wages,” says Dariush Mozaffarian, cardiologist and director of the Food is Medicine Institute at the Friedman School, and senior author of the study, which was published on January 16 in JAMA Network Open. “These hidden costs of increasing health care are even worse for people of color and low-wage workers, leading to less wage growth, heavier insurance premium burden, and greater income inequality.”
In the study, researchers examined national insurance data from individuals covered by ESI family plans in every year between 1988 (44.7 million individuals) and 2019 (44.8 million individuals), bringing together data from the Kaiser Employer Health Benefits Survey and the Bureau of Labor Statistics’ Consumer Expenditure Survey. They combined these with data on earnings of families with ESI from the Census Bureau’s Current Population Survey.
In 1988, health care premiums represented an average of 7.9% of total worker compensation (which is wages plus health care premiums). By 2019, that number jumped to 17.7%. If ESI costs had remained the same proportion as in 1988, the average family with ESI could have earned $8,774 more in annual wages by 2019.
Researchers also found that Black and Hispanic families lost a higher percentage of their wages than white families. By 2019, health care premiums as percentage of compensation were 18.5% for Asian families, 19.2% for Black families, and 19.8% for Hispanic families, compared to 13.8% for white families.
Lower-wage workers are also hit hard by this disparity. In 2019, health care premiums as percentage of compensation represented 28.5% of compensation for families in the 20th
percentile of earnings, compared with only 3.9% for families in the 95th percentile.
“The loss of $125,000 in wages due to rising premium costs over three decades has a real impact on U.S. families, especially those who face economic hardship,” says the study’s first author Kurt Hager, who completed the work as a doctoral student at the Friedman School and is now an instructor of population and quantitative health at UMass Chan Medical School. “This is even worse for lower-paid workers and can lead to a spiral of financial insecurity as insurance costs go up, and wages continue to be suppressed.”
These findings are one more factor highlighting the critical importance of changing U.S. health care policy to focus on prevention and lower cost care, says Mozaffarian. “Health insurance should help people, not hold them back, or push them further behind when it comes to wages and income equality.”
Research reported in this article was supported by the National Institutes of Health’s National Heart, Lung and Blood Institute under grant 2R01HL115189-06A1, and the Colton Family Foundation. Complete information on authors, funders, and conflicts of interest is available in the published paper.
This content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health.
JAMA Network Open
Employer-Sponsored Health Insurance Premium Cost Growth and Its Association With Earnings Inequality Among US Families
Article Publication Date
Dr Emanuel reported receiving personal fees from Massachusetts Association of
Health Plans, Princeton University, Philadelphia Committee on Foreign Relations, Yale University, Hartford Medical
Society, Association of Academic Health Centers, Hawaii Medical Service Association & Queens Health System,
Advocate Aurora Health Summit, DPharm Conference, University of Pittsburgh Medical Center Shadyside,
University of California San Francisco, Advocate Aurora Health, Cain Brothers Conference, Bowdoin College,
Ontario Hospital Association, University of Oklahoma, Sanford Health, Health Plan Alliance, and Emory Health Care
Leaders Retreat; nonfinancial support from Macalester College, Oak CEO Summit, Galien Jerusalem Ethics Forum,
HLTH 2022, HMSA, Tel Aviv University, The Suntory Foundation, The Quadrangle, Lazard Healthcare Leadership
Summit, HLTH 2023, and HC9 Ventures; serving on the external advisory board for Village MD; serving as a board
member for Oncology Analytics; serving on the board of advisors for Cellares; serving as an occasional advisor for
Notable Health; serving as an advisory board member for JSL Health Fund; serving as a health advisor for Clarify;
serving as an advisory board member for the Peterson Center on Healthcare; serving as an advisory board member
for FeelBetter; serving as a consultant for Healthcare Foundry, Korro/Coach-AI, and Aberdeen Inc; being a
co–principal investigator receiving an industrial grant from Mendel Health Inc for Human-Machine Collaborations
to Extract Cancer-Specific Data For Adjudicating Trial Eligibility; being a principal investigator for Schmidt Futures
ML Guided Risk Scoring (funding source, Schidt Futures Schwab Charitable Fund); being a principal investigator
receiving an industrial grant from Janssen Pharmaceuticals Inc purchased services agreement for subject matter
expertise for Janssen informed consent form optimization; being a principal investigator for Bergen Centre For
Ethics And Priority Setting in Health; and being a co–principal investigator for Designing And Implementing Value-
Based Fee-For-Service (funding source, Laura And John Arnold Foundation). Dr Mozaffarian reported receiving
grants from the National Institutes of Health, the Rockefeller Foundation, and the Kaiser Permanente Fund at East
Bay Community Foundation; serving on the Scientific Advisory Board for Beren Therapeutics, Brightseed,
Calibrate, Elysium Health, Filtricine, HumanCo, Instacart, January Inc, Perfect Day, Season Health, and Validation
Institute during the conduct of the study; and receiving grants from the Gates Foundation and Vail Innovative
Global Research; receiving personal fees from Barilla; and serving on the Scientific Advisory Board for Perfect Day
and Tiny Organics Scientific Advisory Board outside the submitted work; holding a patent for UpToDate with
royalties paid for online chapters on fish oil and dietary fats; and stock ownership in Calibrate and HumanCo. No
other disclosures were reported.