Pension & Benefits News Report shows the harmful effect rising health care costs have on wage stagnation
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Tuesday, September 18, 2018

Report shows the harmful effect rising health care costs have on wage stagnation

By Pension and Benefits Editorial Staff

Rising health care costs are diminishing U.S. workers’ take-home pay and putting the American Dream further out of reach, particularly for lower income earners, according to a recent analysis released by the Council for Affordable Health Coverage and Willis Towers Watson. Health Care USA: A Cancer on the American Dream depicts how health care costs have eclipsed compensation growth and whittled away at Americans' disposable earnings, concentrating income among the wealthiest Americans.

The report found the following:

  • Growing health premiums have played a significant and increasing role in skewing net earnings toward higher earners, e.g., workers in the 90th to 99th percentile of earnings had average pre-health premium compensation increases 7.6 times those of workers in the 40th to 49th percentile. After deducting employer and employee premiums for single coverage, those in the higher earnings group had remaining disposable wage increases 26.2 times the lower group on average.
  • Average workers in the bottom 40 percentiles of the earnings distribution saw their disposable earnings decrease over a 16-year period: In constant dollars, annual premiums for full-time, full-year single workers rose from $415 in 1999 to $1,068 in 2015, an increase of $623 per year.
  • Average U.S. health expenditures rose to $10,348 per person in 2016.
  • While the Patient Protection and Affordable Care Act (ACA) promised to moderate health cost inflation, average premiums for individual coverage under an employer plan increased by 18.25 percent in constant dollars between 2010 and 2017, and increased 21.6 percent for family coverage during a period when compensation and wage growth was flat or negative for a large swath of the workforce.
  • Rising health care costs are encroaching on retirement benefits, the survey found. In 2001 employer allocations to health and retirement benefits were 41.9 percent and 58.1 percent respectively. By 2015, the split was in the other direction: 63.5 percent for health benefits and 36.5 percent for retirement.

SOURCE: www.willistowerswatson.com

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