Rapidly rising business health insurance spending is crowding out wage and salary increases.
Health care costs are a great cause of income inequality in America. Businesses that try to provide roughly equal health insurance plans for their employees, and many do, inadvertently make wage and salary inequality worse. A new study by Mark Warshawsky of the Mercatus Center at George Mason University, concludes companies paying for ever-increasing employee health insurance squeezes what’s left for wage and salary raises.
Economic inequality increases because health insurance typically represents a larger share of total compensation for lower-paid than higher-paid workers. The average employer-paid policy cost in 2015 was $12,591 per employee, according to the Kaiser Family Foundation. Companies that same year that raised employees’ wages, say, five percent for all workers, widened the wage and salary gap between the highest and lowest paid.
Despite government health programs,Obamacare, Medicare and Medicaid, empl0yer provided insurance remains the largest source of coverage affecting Americans (147 million). The Warshawsky study found that total employee compensation (including higher health costs) rose faster than just wages and salaries for workers at all income levels–but as expected, the gap was largest at lower income levels.
From 1992 to 2010, about half the increase in wage and salary inequality is explained by rising health costs, Warshawsky estimates. About half the population has little health spending and the five percent sickest Americans account for almost half of all U.S. health care-related spending, he points out. The healthy half, including all the lower income employer-insured, are subsidizing the five percent who rack-up the majority of costs.
Everyone wants comprehensive health coverage and less economic inequality. To hold down health insurance costs, companies are requiring higher deductibles (the average exceeds $1,000). This may boost wages and salaries, but it raises workers’, especially the lower income workers’, out-of-pocket medical costs. Reducing health care costs overall would help greatly.
A more knowledgable population is undoubtedly a healthier population. Horizonte’s, Salt Lake City School District’s alternative high school and adult education center, goal is to endow its formerly unsuccessful, immigrants and refugees with the education necessary to graduate from public high school and earn a privately-funded applied tech or college scholarship. Hopefully their future will be with the higher income workers.