Employers are paying more for healthcare insurance, and the costs are cutting into wages and contributing to growing income inequality. That’s according to research published Tuesday in the Journal of the American Medical Association.

Indeed, as the McKnight’s Business Daily previously has reported, healthcare costs reached a historic high in 2023, according to Willis Towers Watson’s Global Medical Trends Survey. 

Research from the Friedman School of Nutrition Science and Policy at Tufts University in Medford, MA, showed that the cost of employer-sponsored insurance healthcare benefits have outpaced workers’ wages since the late 1980s. 

The researchers examined national insurance data from individuals covered by employer-sponsored family health insurance plans in every year between 1988 and 2019, using data from the Kaiser Employer Health Benefits Survey and the Bureau of Labor Statistics’ Consumer Expenditure Survey. They combined these data with data on earnings of families with employer-sponsored insurance from the Census Bureau’s and federal payroll taxation rates.

The net effect is that wages were reduced by an average of about $9,000 per year by 2019.

“Employers are spending more on insurance premiums instead of that money going to workers as wages,” said Dariush Mozaffarian, PhD, senior author of the study. 

Mozaffarian, a cardiologist and director of the Food is Medicine Institute at the Friedman School, said that the hidden costs of increasing premiums disproportionately affect people of color and low-wage workers, “leading to less wage growth, heavier insurance premium burden, and greater income inequality.”

“In all 32 years of the study, healthcare premiums as a percentage of compensation were significantly higher for non-Hispanic Black and Hispanic families than for non-Hispanic white families,” according to the report.

According to the data, by 2019, healthcare premiums as percentage of compensation were 18.5% for Asian families, 19.2% for Black families and 19.8% for Hispanic families, compared with 13.8% for white families.

Lower-wage workers felt the pinch more significantly than more affluent workers. In 2019, premiums as percentage of compensation represented 28.5% of compensation for families in the 20th percentile of earnings, compared with 3.9% for families in the 95th percentile, the data show.

“The loss of $125,000 in wages due to rising premium costs over three decades has a real impact on US families, especially those who face economic hardship,” said the study’s first author, Kurt Hager, PhD. “This is even worse for lower-paid workers and can lead to a spiral of financial insecurity as insurance costs go up, and wages continue to be suppressed.”

Hagar earned his master’s and doctoral degrees at the Friedman School. He now is an instructor at UMass Chan Medical School in Worcester, MA. 

“These findings are one more factor highlighting the critical importance of changing US healthcare policy to focus on prevention and lower cost care,” Mozaffarian said. “Health insurance should help people, not hold them back, or push them further behind when it comes to wages and income equality.”