Wages have not been able to offset the rising costs of premiums for workers with employer-sponsored coverage over the last three decades, with Black and Hispanic employees hit particularly hard by this development, according to a study in JAMA Network Open.
One possible remedy would be for companies to base premiums on how much individuals get paid; with those in higher wage brackets paying more, but only a few large businesses in the United States take that approach, and even in those cases the gap persists somewhat.
The study stated that for “the few large employers that adjust premium costs by earnings level, the relative price of premiums is often not directly proportional to the earnings gap between the highest-paid and lowest-paid workers in the company, meaning low-income workers still pay a greater percentage of their income to premiums.”
"The displacement of wages owing to increasing health care premiums could be particularly problematic for lower-wage workers and could be associated with earnings inequality," the researchers wrote.
This represents one of the “hidden costs” of providing healthcare benefits, according to the study.
“By receiving lower earnings historically, Black and Hispanic households shoulder a greater proportion of the increase in healthcare premiums as a percentage of their compensation, a trend that persisted throughout all three decades of our analysis,” the study stated.
Though lower-wage workers in all demographic groups, as well as racial and ethnic minorities, particularly felt the burden of increased premiums, everybody who got health benefits from an employer had to contribute a bigger proportion of their pay, according to the study, which included data from 1988 to 2019 on employer-sponsored plans.
The mean cumulative lost earnings in those decades due to increased premiums come to $125,340 per family in 2019 dollars, or about 5% of total earnings over the 32-year period. By 2019, 13.8% of compensation for white families went to premium costs compared to 19.2% for non-Hispanic Black families and 19.8% for Hispanic families with employer plans.
“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,” the study stated. “This pattern holds true even among workers with ESI, as our analysis found.”
The study cites recent polling by the Census Bureau showing that 60% of blacks and 65% of Hispanics said that they have trouble paying for healthcare services compared to 39% of whites.
The data for the economic evaluation, serial cross-sectional analyses come from the Consumer Expenditure Survey, the U.S. Census Bureau’s Current Population Survey, federal payroll taxation rates, and the Kaiser Employer Health Benefits Survey.
The study cites household size as another variable. Many employer plans have a set rate for family premiums no matter the size of the family, which can translate into larger families getting a better deal. In 2019, White households receiving ESI had a mean household size of 3.2 people, a bit smaller than for Asian (3.7), Black (3.4), and Hispanic (3.9) households.
“Thus, differences in the number of people covered could be considered to slightly mitigate the racial inequities of increasing premium costs, although the association with actual lost wages remains,” the study stated.
In 2019, families at the 20th percentile of compensation found that 28.5% of their compensation went to pay healthcare premiums. Meanwhile, those at the 95th percentile of compensation needed only pay 3.9% of their earnings for premiums, representing a 9-fold difference in the share of healthcare premiums as a percentage of earnings.
“The increasing health insurance premiums since 1988 contributed to nearly $9,000 in annual lost earnings in 2019” over the 32-year period, the study stated.
The study noted that nations such as Canada and Great Britain have a health system separate from employment and the authors also note that many in the United States have lobbied for an expansion of Medicaid and Medicare as a way to battle healthcare inequities.
Public opinion and public policy do not seem to favor such a move. The study stated that “even with increasing premium costs, recent surveys show high worker satisfaction with ESI coverage. Prior to the passage of the Patient Protection and Affordable Care Act, ESI was voluntarily provided to recruit and retain talented employees. The Patient Protection and Affordable Care Act now requires companies with 50 or more employees to provide basic health insurance coverage, although companies still compete on the overall benefits and costs of such coverage.”