Lots of Americans are in the midst of open enrollment for health benefits. This almost certainly means lots of Americans are also experiencing sticker shock over their new premiums.
A new study from the consulting firm Aon helps explain why. It's not that health care costs are skyrocketing. Quite the opposite: Aon finds that health care costs grew really slowly in 2015 — the slowest growth since 1996.
Instead, health premiums are expensive because companies keep shifting a larger share of the bill onto their workers.
The employee share of premiums been rising since 2012
Most companies typically split the cost of health insurance premiums with their workers. Since 2012, companies have slowly decreased the amount they chip in. You can see that in the chart below.
In 2012, workers paid 20.5 percent of their premium. By 2016, Aon expects that share will rise to 22.9 percent. Workers' share of their premiums has risen by 23 percent since 2012. By contrast, the companies' share has grown 14 percent over the same time period.
The graph above is limited to monthly premiums, but there are other, more complete ways to measure health spending, like including the deductibles a health plan has or the copayments it charges. You can pull together all those ways we pay our health care bills — premiums, deductibles, cost sharing — to figure out total health care costs and who pays what share.
Aon broke down the data that way, and workers don't come out very well either. When you look at total health spending, it shows the percentage of costs covered by employers has decreased by about 1 percent per year since 2012, driving up workers' share 1 percent each year too. An estimated 38 percent of companies have increased deductibles or copayments, and 46 percent plan to do so in the future.
Your company's health insurance costs are going down. But yours are going up.
The Aon study isn't the first to show this phenomenon. The Center for American Progress released data earlier this year that made a similar point. Its study goes back even further, to 2007, and shows workers' health costs rising faster than those of their employers.
"The lines really have been diverging more over the past couple of years," says Topher Spiro, a vice president at Center for American Progress and lead author on the report.
Most health economists credit this particular trend — higher cost sharing — with helping keep cost growth low over the past few years. When consumers have to pay more of their own health care bill, they tend to go to the doctor less.
The theory of higher deductibles is that they'll make consumers more cost-conscious. This recent bout of slow health cost growth suggests this theory is right (as does a big, long body of research). But consumers don't seem to be reaping the dividends of their cost-conscious decision-making. Those go to the employer rather than to the worker.
Workers aren't making up the losses in higher wages
It would be one thing if companies were just shifting the money they used to spend on health care into wages. Employees would have to pay bigger premiums and copays, but they'd also have more money in their pocket to cover expenses.
But the CAP report suggests isn't the case at all — wages are actually going down at the same time that health care benefits are declining:
Employers have not compensated employees for their rising health care costs with wage increases. In fact, wages fell during this period, further compounding the problem of rising health care costs. Among all families, the median real income actually fell by $5,116 between 2007 and 2013—from $68,931 to $63,815.22* As a result, the average American worker has felt pinched by both stagnating wages and increasing health care costs.
Economists tend to believe that eventually, any cut in benefits will get replaced with increased wages. But they also think it will take time, as workers negotiate raises and switch jobs and do other things that tend to trigger a pay bump. But the research on this point is relatively thin. For a much longer review of it, click here.