FYI on ESIs

ABC News' Christina Capatides reports:

Tired of hearing about health insurance premiums going up, while your salary basically stays the same? You’re not alone.

Council of Economic Advisers Chair Christina Romer and Senior Economist Mark Duggan estimate on the White House blog that, “If the growth rates in both workers' average total compensation and in employer-sponsored health insurance premiums remain at their recent rates, this share will increase to 15.0 percent by 2019 and will continue to increase thereafter.”

Banking on the fact that most Americans repel from the idea of this discrepancy getting even worse, Romer and the Obama administration are pointing to a new Bureau of Labor Statistics study, as one more argument for the President’s reform plan.

With frustration rumbling through the nation over the discrepancy between rising health care costs and take-home wages, the Bureau of Labor Statistics is hoping to shed light on the causes of this upsetting trend.

Recent data out from the Bureau links rising health insurance premiums to stagnant wages by showing how increases in one can adversely affect the other.

The "Employer Costs for Employee Compensation" (ECEC) survey breaks the issue down into smaller categories like “workers’ inflation-adjusted average,” “average hourly wage and salary compensation,” and “growth rate for ESI premiums.” In doing so, it lays out the reasons why a steadily rising portion of workers’ total compensation has gone to health care costs in recent years.

Specifically, the survey attributes the steep burden placed on individuals and families in this country to the escalation of health care spending from 2000 to 2009.

In this country, businesses have the option of either compensating their workers with higher wages or with lower wages that also include benefits like employer-sponsored health insurance (ESI). If your employer chooses this second option, then increases in ESI premiums have the unfortunate effect of essentially eliminating increases in your wages.

So, when employer expenditures on these premiums escalate as rapidly as the survey shows they did over the past 9 years, it is workers’ wage growth that suffers the consequences. Here’s a look into the numbers that the Bureau of Labor Statistics just released:

According to the ECEC data, there is a striking difference between the growth rates of 1) the workers’ inflation-adjusted average (a mere 1.3 percent per year, from $26.23 per hour in 2000 to $29.39 per hour in 2009), 2) the average hourly wage and salary compensation (an increase of just 0.7 percent per year), and 3) the growth rate for ESI premiums (a much higher 5.1 percent per year). That means that the fraction of workers’ total compensation going to ESI premiums has increased from 7.4 percent to 10.3 percent over the time span that the survey highlights.

The statistic representing the average share of workers’ total compensation going to ESI premiums would be even more arresting if it took into account the fact that a steadily waning number of workers and their dependents are covered by ESI. According to the most recent numbers released by the U.S. Census Bureau, the number of non-elderly adults and children covered by ESI plummeted from 86 percent in 2000 to 62 percent in 2008.”

As the Obama White House embarks on its final push for health care reform, it plays to reason that it would highlight the ECEC survey as further proof of the necessity for their health care legislation.

–Christina Capatides