Health‑Insurance Premium Surge Squeezes Wage Gains, Economist Warns
Rising employer contributions to health insurance are eroding recent wage growth and shifting more cost to workers.
Employer‑Paid Health Costs Outpace Wage Growth
In the third quarter, the Bureau of Labor Statistics reported a 3.1% year‑over‑year rise in wages and salaries. At the same time, employer contributions to health insurance surged 6.4%, matching the fastest pace in twenty years, according to Guy Berger, senior fellow at the Burning Glass Institute.
Berger calculated in a Substack post that if contributions had risen only 3%—the rate a few years earlier—wage growth would be about 0.2‑0.3 percentage points higher today. That’s not a lot, but not nothing either, he wrote, noting the potential impact on workers who rely on “buy now, pay later” plans for essentials.
Workers Bear a Larger Share of Premiums
Berger also warned that the data likely understates the pressure on employees because employer contributions may not be keeping pace with actual insurance costs. He explained that employees are paying a bigger share of premiums, while plans cover less, forcing higher out‑of‑pocket spending.
ACA Marketplace Premiums Spike
Health‑research nonprofit KFF projected a 13% increase in 2027 premiums for Affordable Care Act (ACA) plans, the second‑largest jump since 2018. The average monthly premium for a 40‑year‑old buying a mid‑tier plan would rise to $704, up from $624 in 2026 and $497 in 2025.
Since Congress did not renew the enhanced subsidies enacted during the pandemic, ACA enrollment fell by 12%—about 19.2 million people—between February of this year and a year earlier. The drop primarily involved healthier individuals, leaving a sicker pool that drives premiums higher.
Insurer participation in the marketplace is also shrinking. KFF reported 31 state‑level insurer departures by late October, compared with eight additions. Insurers have warned that the market could continue to deteriorate in 2027 as premium tax credits end, leaving some enrollees unable to afford coverage.
Broader Economic Context
Higher health‑insurance costs join rising gas and utility bills as sources of voter anxiety about the cost of living, even as the labor market remains near full employment. Consumer confidence has slipped despite solid wage gains, reflecting the growing affordability challenge.
Overall, the combined effect of soaring employer contributions and escalating ACA premiums is quietly curbing the purchasing power that wage growth would otherwise provide, leaving many workers to shoulder a larger portion of their health‑care expenses.
