Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=209840
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Courtesy of Divya Mohan Little

Divya Mohan Little and her husband, Corey, hope that the Affordable Care Act will be a solution for their health-care cost issues.


Employers are paying more for health-care costs

by Donna M. Marbury
Oct 31, 2012


EMPLY

Donna Marbury/MEDILL

Employers are increasing the amount they pay  for worker benefits faster than they are increasing wages and salaries.

Divya Mohan Little had to be strategic when it came to keeping her family’s health care affordable. “I'm lucky enough to be employed by an organization that values access to high quality affordable health care,” said Little, communications director of Illinois Maternal and Child Health Coalition. “However, my husband is a recent law school graduate and if I were to cover him under my plan, it would be about a quarter of my paycheck.” He is currently uninsured but is looking for a less expensive alternative.

Little says health-care costs also are a big issue with many of her colleagues. Some of them have medical and dental plans that cost up to $500 a month and cut into their quality of life. “I have other friends who are working in temporary or contract positions who choose to forgo health care because it isn't affordable,” she says. “That is cost prohibitive with many nonprofit salaries, especially for those just starting out in the industry.”

Many U.S. workers are feeling the pinch in their pocket books as health-care costs continue to outpace growth in wages and salaries, according to a government report released Wednesday. Employers paid 3 percent more toward health-care benefits in the 12-month period ended Sept. 30, but wages only increased 0.4 percent, according to the U.S. Bureau of Labor Statistics’ Employment Cost Index.

Worker benefits account for the largest increase in employee costs, rising 0.8 percent in the third quarter and 2.6 percent since last year.

Economists say the gap between health-care costs and wages has been growing for years. Employer-sponsored family health coverage has increased at nearly four times the rate of wages and inflation since 1999, according to a study by the Kaiser Family Foundation and the Health Research & Education Trust. “Health-care costs are taking a big portion out of the budget for working families whose incomes are either flat or falling,” said Abdur Chowdhury, chair of economics at Marquette University.

Clare Krusing, spokeswoman for America’s Health Insurance Plans, a trade association for insurers, said the organization is concerned about tax increases on its members from the Affordable Care Act. The group believes the act could send insurance rates 2.3 percent higher in 2014. “We have been vocal in the past that a number of provisions in the [Affordable Care Act] will undermine the affordability of coverage,” Krusing said.

Overall, compensation for workers increased 0.4 percent in the third quarter, according to the index, which measures the costs employers incur for salaries, wages and benefits. For the 12 months ended Sept. 30, compensation rose 2 percent. Wages and salaries, which make up 70 percent of compensation costs, account for 0.3 percent of the increase in the quarter, and 1.7 percent of the 12-month increase. Worker compensation increased 0.5 percent in the second quarter.

Also, private industries are paying workers more money but spending less for benefits than state and local governments, according to the index. Compensation costs in the past year increased 2 percent for the private sector with wages and salaries increasing by 1.8 percent. Costs of benefits increased 2.3 percent in the past 12 months.

State and local governments increased compensation 1.8 percent with 1.1 percent going to wages and salary increases and 3.2 percent going to benefit cost increases.