Health Care Premiums Rise Faster Than Wages in Recent Years

According to The Burden of Health Insurance Premium Increases on American Families by the Executive Office of the President (EOP), health care premiums are rising faster than most Americans’ income. In an attempt to make health care costs more manageable, the Affordable Care Act (ACA) was passed in March 2010. Based on a data analysis of the EOP’s September 2009 report, Freedom Partners, a nonpartisan organization that promotes the benefits of free markets and a free society, states the ACA has yet to reach its goal.

Health insurance premiums increased by 9.4% from 2010-2011, the first year after the ACA was passed, and have continued to rise. Throughout the nation, the average annual family premium for an employer-sponsored plan increased 4.2% to $17,545. At the state level, premiums have averaged a 28% increase from 2009 to 2014.

Increasing Financial Burden

As of 2003, employees have paid greater premium shares for job-based health insurance. Greater out-of-pocket costs, especially deductibles, have contributed to workers’ financial burdens as employers seek to control their own health care expenses. In addition, a greater number of workers are covered by plans with deductibles than a decade prior.

As stated in a 2014 Commonwealth Fund report, the average employee-paid portion of a single premium plan in 2003 was $606 annually, or 17% of the total premiums. By 2013, that average increased to $5,571 annually, or 21% of the total premiums. In 2003, approximately half the workforce paid a deductible for their health plans. By 2013, that number rose to 81%. The average deductible had grown from $1,079 for a family plan in 2003 to $2,491 by 2013.

Lagging Personal Income

In 2013, personal income rose 0.7% while a family premium health plan went up 3.8% and a single premium plan increased 4.8%. It cost approximately 3-4% more to pay health insurance premiums. Add to that the skyrocketing cost of living due to housing, food and other necessities while salaries between 2003 and 2015 rose only 11% and it is easy to see how the financial crunch of rising health insurance costs is putting more financial stress on families.

As a result, a greater amount of disposable income is being used to cover health insurance premiums. Less money is left for short-term savings, retirement and other needs. Families are being forced to make challenging financial sacrifices to pay for required health coverage. Paying health premiums may become unaffordable, forcing families to pay a tax penalty that adds to this burden.

Postponing Doctor Visits

Due to skyrocketing premiums, many Americans are limiting their trips to the doctor or are not going at all. Because of the high costs associated with office visits, tests, surgeries and related expenses, many families believe they will not be able to afford their medical bills if something unexpected happens. For these families, the prospect of filing bankruptcy can quickly become reality. However, by choosing not to see a physician, Americans are setting themselves up for increased risk of diseases that are potentially treatable through early detection.

In many cases, families are able to lower their premium payments by utilizing online tools to determine the cost of a specific test or office visit, accessing a nurse or doctor by phone or computer, or choosing higher plan deductibles. However, in the event of a major medical event, more money will be owed before the insurance will cover any procedures.

Based on the data given in the 2009 EOP report, and the fact that many Americans are refusing to see their doctors due to rising health insurance costs, the ACA is not attaining its goal of making health care affordable for families. Lawmakers need to reconvene and create a more effective plan that keeps money in families’ budgets, rather than taking more out for something as necessary as medical care.