In a thriving economy, many businesses are better able to afford pay raises for employees. In turn, rising wages should allow our population to spend more, creating a ripple effect and further boosting the economy.
Growing Out-of-Pocket Medical Expenses
For some, however, these new earnings will go directly toward health care expenses. Why? Because even though wages are rising, premiums, co-pays, and other out-of-pocket medical expenses are growing at a more expedited rate than income, often negating salary raises that employees have rightly earned.
The Bureau of Labor Statistics revealed that after accounting for inflation, real average hourly earnings have increased 1.3% since May 2018. Despite this increase, a good portion of the working population still feels financial pressure, particularly when it comes to health care.
A Constant Battle for Employers
According to the Economic Policy Institute, “rising premiums, out-of-pocket costs, and public health spending are crowding out income gains.” The article also states that the premium prices for ESI (Employer-Sponsored Insurance) family plan has risen from just under $5,800 to above $18,100 from 1999 to 2016. That’s more than a 200% increase!
Over the same time period, per capita income nationwide has increased by less than 40%. This juxtaposition creates a constant battle for employers as they fight to minimize their costs, while also offering fair compensation to employees.
Find the Right Balance
This year, employers could experience as much as a 25% increase in medical premiums, and in order to stay afloat, many will be forced to shift some of this burden to employees through higher deductibles, co-pays and out-of-pocket expenses. However, as we’ve discussed in previous articles, the current landscape of the job market provides less flexibility for employers to shift costs to employees. With such benefit costs continuing to escalate for employers, it will be critical for organizations to find the right cost-sharing balance.
To accomplish this, employers need to take a holistic view at expenses. Looking at the benefit budget in a silo is no longer adequate because it doesn’t factor in the costs associated with losing valuable talent. The way employers handle rising premiums and their impact on an employees’ earnings will greatly impact the company’s ability to attract and retain their ideal candidates, and in turn, their bottom line.