Slowed Pay Increases Contribute to Health Care Cost Concerns

February 12, 2008 ( - A recent Kaiser Family Foundation analysis shows that smaller increases in their paychecks contribute to workers' worry over health care costs.

The report, Wages and Benefits: A Long-Term View, part of Kaiser’s online series, Snapshots: Health Care Costs, says that between 2001 and 2007, health insurance premiums rose 78% – a much faster rate of increase than general inflation (17%) or workers’ earnings (19%). Aside from feeling the impact of health care costs increases through increased out-of-pocket spending, families also are burdened by a decrease in paychecks at the end of the equation.

Kaiser also reports that although wages are consistently the largest component of worker compensation, the shares of compensation paid to employees in the form of health benefits and other fringe benefits/payroll taxes have increased as a share of GDP (gross domestic product), while the amount paid as wages has fallen. Health benefit costs have increased from 0.6% of GDP in 1960 to 4.1% in 2006.

Fringe benefits other than health care and payroll taxes have also increased over this period, ranging from 3.8% of GDP in 1960 to 6.7% in 2006, while wages have fallen from 51.8% of GDP in 1960 to 45.6% in 2006.

Non-health benefits increased as a share of total compensation from the 1960s to the 1980s, but have fallen modestly since, but employer payments for health benefits have increased as a share of total compensation in every decade, reaching 7.2% of compensation in 2006.

According to the report, the total amount spent by employers on group health insurance policies from 1960 to 2006 grew over twenty-fold from $23 billion in 1960 to $537 billion in 2006. Except for a short period between 1995 through 1998, the growth has been constant.

The Kaiser Snapshot report is here .