Employer-sponsored health coverage, long the gold standard in American healthcare, is imploding. This once-popular and affordable insurance is becoming increasingly out of reach as spiraling costs force employers to drop plans and employees to opt out. Congress is quietly working in bipartisan fashion to pass healthcare legislation that can restore this crucial coverage if stronger price-transparency provisions are incorporated.
The average annual employer-sponsored family health premium is now $27,000 — about as much as a new base-model car. This cost, which is generally split between employers and employees at a 75% to 25% ratio, has increased by 1,000% since 1987, about six times faster than the overall inflation rate.
These runaway expenditures are forcing many small businesses to drop coverage altogether. As Bob Herman recently profiled in STAT News, the share of small businesses offering health coverage has declined by nearly one-third since 2010.
Given that small businesses account for nearly two-thirds of job creation, employment opportunities with health benefits are now harder than ever to come by.
But that’s only half the story. Even for employees fortunate enough to still have access to employer-sponsored health coverage, fewer and fewer are actually enrolling. According to Bureau of Labor Statistics data, the employee health benefits “take-up” rate has declined from 75% to 65% since 2013 as costs have soared.
Worker opt-outs are particularly high in low-wage industries where costs are highest relative to incomes. Among retail workers, for instance, the take-up rate has declined from 69% to 53% over this timeframe.
Employees are increasingly saying, “Thanks, but no thanks,” to expensive health benefits. Gone are the days when health coverage equaled affordable access. Nearly half of insured Americans now say healthcare is unaffordable.
Workers opting out avoid a painful paycheck deduction. But they still pay a significant, if indirect, premium because the employer share of health plan costs is largely funded through foregone wages.
Employers quietly reduce worker pay and benefits, including among opt-outs, to help cover escalating overall health plan costs. The consultancy Willis Towers Watson estimates that around half of the compensation gains made by low-wage workers since 2000 have been cannibalized by rising health plan costs.
Healthcare’s spiraling costs and role in stagnant wages make it the No. 1 culprit in the ongoing American affordability crisis.
Congress is marking up price-transparency legislation that can empower employers to reduce these costs if elements from the strong, bipartisan Patients Deserve Price Tags Act are included. This bill requires actual prices, including all discounted cash and insurance-negotiated rates, throughout the healthcare system. With this information, employers can spot value, avoid price gouging, and design affordable plans. Savings could be shared with employees through lower premiums and higher wages.
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The Patients Deserve Price Tags Act would also give employers access to their deidentified claims data. With this information, employers can ensure billing and payment integrity, stopping spread pricing, unnecessary middlemen, and overbilling that drive health plan premiums higher. A 2024 New York Times investigation shows how insurance companies often charge health plans twice as much as they pay providers, pocketing the difference. Sunlight can expose these inflationary schemes.
Tweaks to the Affordable Care Act and Medicaid have dominated health headlines for the past year, but the changes in the much larger employer market are much more significant. By strengthening price transparency legislation currently under consideration, Congress can enable employers to reverse runaway costs and the trends of businesses dropping coverage and workers opting out.
Jordan Bruneau is the director of Great Lakes Policy Institute.