America’s health care revolution hurts all workers
New York Post
16th July 2016
The health care revolution has only just begun. And the pain associated with its cost has been felt from the management ranks all the way down to the mailroom, with the cost of plans exploding, research shows. The average policy paid by the boss cost $12, 600 last year, a threefold rise since 1999.
And because these plans generally have a fixed annual cost for each worker, they’re contributing to America’s startling rise in wage inequality. That’s because employees are disproportionately hurt by price jumps, according to a new study by Mark Warshawsky of the Mercatus Center at George Mason University. Policy costs are surging as much as 10 percent or more every renewal period, which makes an already difficult situation worse for the estimated 147 million Americans enrolled in employer plans.
And the trend results in painful choices. “As health care costs increase, companies have to be really mindful of how much the company can absorb, versus how much are you going to push back on your employees,” said Ashley Pelliccione, director of human resources at Namely, a New software startup. “Every year when you have the renewal process, you have to make that determination.
” Warshawsky’s study reveals how soaring health care costs have depressed the yearly earnings growth rate for US workers four times as much as for the top 1 percent of workers. “Rising health care costs suppressed earnings growth much more for and workers than for high earners, with the result that reported earnings inequality increased significantly,” said the study’s author. In simple terms, a company that, for instance, budgets 5 percent raises for its workers may see eyebrows rise when employees open their pay envelopes.
With health care spending rising 10 percent, it is the workers who disproportionately pay the most. workers already pull down $100, 000 each year in wages, versus $50, 000 for workers. By one analysis, both the and workers in this example are docked an extra $1, 200 each — exactly 10 percent of the previous year’s $12, 000 health care plan — so the ultimately clear $1, 350 in wages after the raise.
That $1, 350 calculation is based on an overall $2, 500 comp gain, or 5 percent of $50, 000. The worker, meanwhile, sees his wages grow by $3, 800, significantly more than double his ’s. This rise in US income inequality can certainly be explained by other factors, from outsourcing to technological efficiencies, say analysts.
But the acceleration in health care costs is emerging as the latest significant contributor, they add. The impact is felt by millions of American workers, with more than of all workers being and many more barely above that level. Despite some innovative solutions, health care costs keep rising, say analysts.
“One of the initially stated objectives of the Affordable Care Act was to reduce the rate of growth in health care costs,” Warshawsky said. “However, after a brief pause — likely caused by the recession — the rate of increase in health care spending has picked up again recently, and so the Affordable Care Act does not seem to be the solution to this problem. ”.
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