Health Insurance Costs Outpace Wages

Study Shows Premiums Rise Faster Than Workers' Incomes

Medically Reviewed by Louise Chang, MD on October 23, 2008
From the WebMD Archives

Oct. 23, 2008 -- Workers' health insurance premiums have shot up more than five times faster than their wages since 2000, adding to an increasingly tight squeeze on family budgets, according to a report released Thursday by a health care consumer group.

The report shows that the average cost of family coverage in the workplace went from $6,672 in 2000 to $12,078 in 2007. That's more than a 78% rise. But at the same time, average wages rose about 15%, according to Families USA, a left-leaning advocacy group.

"People who used to take health care coverage for granted no longer can do so, and they are at growing risk of joining the ranks of the uninsured or underinsured," says Ron Pollack, the group's president.

As health costs rise, employers around the country are moving to save money by cutting back benefits or scaling down their share of premium costs. Still, most Americans still get their health coverage through an employer or the workplace of a family member.

The gap between wages and health costs varies widely between states, Pollack says. But here are some highlights:

  • Michigan had the biggest gap. Health insurance premiums rose more than 17 times faster than workers' average earnings between 2000 and 2007.
  • Nevada had the narrowest gap. Overall, premiums rose 2.5 times as fast as wages.
  • Wyoming workers saw the biggest premium increase in the nation. Premiums rose nearly 130% over the eight years of the study.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, an insurance industry trade group, says one reason insurance costs are rising: "There is overuse, underuse, and misuse of health care services."

Zirekelbach also notes: "There are a lot of new and expensive technologies that are being used without proof of which ones work best and which ones are cost-effective."

Strain on Family Budgets

Other studies show that the growth in private insurance premiums has slowed in recent years. Premiums rose just 5% in 2007, much more slowly than the nearly 14% rise as recently as 2003, according to the Henry J. Kaiser Family Foundation.

But Pollack says his group's study shows that workers are facing a "triple whammy." Overall premiums are rising, while workers' shares of those premiums are going up, too. At the same time, the added pressure on employers is forcing them to hold back on wages, he says.

Nearly half of the respondents in a poll released by the Kaiser Foundation earlier this week said they'd skipped some needed medical care because of cost. More than a third said they'd postponed needed treatment, and about a quarter said they'd divided pills, skipped doses, or skipped filling a prescription because of the price.

"People's budgets are being strained in multiple ways these days, and health care is no exception," says Mollyann Brodie, a vice president and director of public opinion and survey research at Kaiser.

The Families USA findings come less than two weeks before Election Day. Both Barack Obama, the Democratic candidate, and John McCain, the Republican candidate, have pegged health care reform as a top domestic priority.

McCain's health plan seeks to shift workers away from employer-sponsored coverage and instead give a tax credit. The credit -- $2,500 for individuals and $5,000 for families -- could be used to purchase coverage on the individual insurance market. McCain also wants to cut insurance regulations so that companies can more easily offer streamlined coverage across state lines.

Obama's plan requires insurance for all children. It also requires employers to either provide coverage for workers or pay into a fund for coverage. Obama includes tax breaks for some businesses to help cover those costs. He also wants to set minimum national standards for coverage and then let private insurance companies sell subsidized plans to business and individuals.

Show Sources


Families USA: "Premiums versus Paychecks: A Growing Burden for Workers."

Ron Pollack, president, Families USA.

Henry J. Kaiser Family Foundation: "2008 and 2003 Employer Health Benefits Surveys."

Kaiser Family Foundation: "Election 2008 Tracking Poll."

Robert Zirkelbach, spokesman, America's Health Insurance Plans.

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