(TNND) — Health insurance premiums have grown three times faster than wages over the past 25 years, according to new research from Rice University experts.
They found employer-sponsored health insurance premiums ballooned by 342% from 1999 to 2024, while wages grew 119% and overall inflation was 64%.
“The increase is absolutely astonishing,” said Vivian Ho, a health economist at Rice who co-authored the report published this week in the journal JAMA Network Open.
Ho said American workers are trying to make ends meet, and they don’t realize how much health insurance premiums are cutting into their income.
“Because you sign up for health insurance at one time in the year, and then your employer is just taking the money out of your paycheck, and you just forget about it,” she said. “So, it’s not a direct high cost that you would see every month.”
Folks feel the pain of higher prices when they go to the grocery store or pay their monthly household bills.
The higher costs of health insurance for the 160 million Americans on an employer-sponsored plan are out of sight, out of mind.
Credit: Vivian Ho, Salpy Kanimian, JAMA Network Open
Ho said people blame insurance companies for the skyrocketing costs of health care.
“And certainly, there are insurers that are making massive profits, but that’s not the whole story,” she said. “To me, the main story that the public doesn’t understand is that the main reason those premiums have increased is because hospital prices have risen.”
Hospitals are aggressively raising prices because their CEOs have incentives to do so, Ho and her co-author Salpy Kanimian wrote in an article accompanying their new research.
One study found that for nonprofit health systems, the greatest pay increases between 2012 and 2019 went to hospital CEOs who grew the profits and size of their organizations the most, they wrote. However, the financial reward of delivering above-average quality of care declined.
Ho said hospitals will attribute the price increases to the rising costs of nurses, medical supplies and drugs.
“That is true,” she said. “However, they’ve consolidated, and their prices are just way higher than what their costs are. And that’s what’s most concerning. And so, the public should be asking some really tough questions.”
Both for-profit and nonprofit hospitals are driving health care prices higher, Ho said.
But most of the nation’s largest health care systems are nonprofits.
“And if they actually behaved like nonprofits and lowered their prices, it would force the for-profits to lower their prices, too, in order to compete and get patients,” Ho said.
Consolidation has been rampant in the health care system for decades, she said. And that’s empowered the big players to charge higher prices due to a lack of competition.
Meanwhile, Ho said the higher prices aren’t leading to better quality health care.
“Unfortunately, when health economists look at the data and they try and find a correlation between the price of health care services and the quality, that patient outcomes, there is no correlation,” she said.
The report from Ho and Kanimian didn’t address the expiring Affordable Care Act, or Obamacare, subsidies, as millions of Americans face sharply higher premiums or the possibility of losing their insurance.
If Obamacare becomes more expensive, what will happen to the cost of employer-sponsored health insurance?
“That’s an important question, and it’s one that health economists, we can’t even agree on the right answer,” Ho said.
Some of the people losing Obamacare coverage will be healthy and won’t put stress on the health care system.
Others will be unhealthy and create a burden of uninsured demand on hospitals.
But the effects will be uneven on the different health care systems, Ho said.
Meanwhile, options are limited to rein in costs for Americans who get health insurance through their work.
Nonprofit health care systems should be required to disclose the compensation matrix for their executives, Ho said. They should be transparent with the factors used to determine the salary of the CEO.
“And what I’m hoping, maybe I’m too idealistic, but somehow that those board members, you get across to them, you’re serving a nonprofit, you should care about the well-being of the average citizen in your community,” Ho said.
Ho and Kanimian also said employers could change benefit designs to help control costs, including tiered or variable copay systems that might save money.
