The healthcare revolution only has just begun.
And the pain associated with its cost has been felt from the management ranks down to the mailroom, with the price of plans exploding, studies have shown.
The average policy paid by the boss cost $12,600 this past year, a threefold rise since 1999.
And since these plans generally have a fixed annual cost for every worker, they're contributing to America's startling rise in wage inequality.
That's because lower-paid workers are disproportionately hurt by price jumps, according to a new study by Mark Warshawsky from the Mercatus Center at George Mason University.
Policy costs are surging as much as 10 % or more every 12-month renewal period, making an already difficult situation worse for the estimated 147 million Americans signed up for employer plans.
And the trend leads to painful choices.
“As healthcare costs increase, companies need to be really conscious of just how much the organization can absorb, versus just how much are you going to push back on your employees,” said Ashley Pelliccione, director of recruiting at Namely, a 280-person New York-based software startup. “Every year when you have the renewal process, you have to make that determination.”
Warshawsky's study reveals how soaring healthcare costs have depressed the yearly earnings rate of growth for lower-paid, full-time US workers four times as much as for that top 1 % of workers.
“Rising health care costs suppressed earnings growth much more for lower- and middle-class workers than for high earners, with the result that reported earnings inequality more than doubled,” said the study's author.
In layman's terms, a company that, for example, budgets Five percent raises because of its workers may see eyebrows rise when employees open their pay envelopes. With health care spending rising 10 percent, it is the lowest-paid workers who disproportionately pay the most.
Higher-paid workers already pull down $100,000 each year in wages, versus $50,000 for lower-paid workers.
By one analysis, both lowest- and highest-paid workers in this example are docked an extra $1,200 each – exactly 10 % of the previous year's $12,000 health care insurance option – so the lowest-paid ultimately clear $1,350 in wages following the raise. That $1,350 calculation is based on an overall $2,500 comp gain, or Five percent of $50,000. The higher-paid worker, meanwhile, sees his take-home wages grow by $3,800, much more than double his co-worker's.
This increase in US income inequality can typically be explained by other factors, from outsourcing to technological efficiencies, say analysts. But the acceleration in health care costs is proving itself to be the latest significant contributor, they add.
The impact is gone through by countless American workers, with more than one-quarter of all workers being low-paid and many more barely above that much cla.
Despite some innovative solutions, healthcare costs keep rising, say analysts.
“One of the initially stated objectives of the Affordable Care Act ended up being to reduce the rate of development in health care costs,” Warshawsky said. “However, after a brief pause – likely caused by the recession – the rate of rise in health care spending has acquired again recently, so the Affordable Care Act does not appear to be the solution to this issue.”
