Health Insurance Costs Stifling Job Growth, New York Times Reports
The New York Times on Thursday examined the link between escalating health insurance premiums -- "one of the fastest-growing costs for companies" -- and the economy. According to the Times, "Despite nearly three years of uninterrupted economic growth," there are about one million fewer jobs nationwide than there were before the recession in 2001. Employers have been reluctant to hire full-time employees because the cost of health benefits, about $3,000 per year per employee, has increased 8.1% during the past year -- more than three times the inflation rate and the rate of increases in wages and salaries, the Times reports. During the second quarter, benefit costs -- including health care -- increased 7.3% over last year, while wages grew 2.6%; total compensation costs rose 4%.
According to the Times, rising health care premiums can be attributed to health care costs driven up by "expensive new drugs, many of them heavily advertised to consumers; medical advances including diagnostic tests that require costly new machines; and a reaction to past restrictions in managed care health plans that sought to rein in costs." To address the increasing cost of providing health benefits, some employers are raising premiums and deductibles, eliminating coverage for dependents, freezing or reducing wages or canceling health care plans. Others are hiring more temporary employees to avoid paying for health benefits. As a result, the temporary employment industry, "where jobs may or may not include health benefits," has experienced a 9% growth rate since last year. Overall, the labor force has increased only 1% in the past year (Porter, New York Times, 8/19).
In related news, Democratic presidential candidate Sen. John Kerry (Mass.) on Thursday is expected to unveil a study by former Clinton economic adviser Laura Tyson that links job losses to rising health costs, the AP/Boston Globe reports. According to the study, the "weak job market" is partly the result of employers having to pay more for workers' health care, according to the AP/Globe. During a speech at the International Association of Fire Fighters convention in Boston and a "front-porch visit" at a home in Derry, N.H., Kerry on Thursday is expected also to promote his health proposal (Pickler, AP/Boston Globe, 8/19).
The plan would cost about $653 billion over 10 years and would expand health coverage to an estimated 26.7 million U.S. residents. The plan would provide government subsidies for the cost of catastrophic health care expenses, reducing the cost to employers and employees by an estimated 10%. Kerry has said he would help finance the plan with the repeal of tax cuts for families whose annual incomes exceed $200,000 (California Healthline, 8/16).
In a statement Wednesday, Kerry said President Bush has not implemented any plans to reduce health care costs. "America can't afford four more years of a plan that hasn't saved us a single dime or created a single job," Kerry said, adding, "We need a president who understands that our businesses can't thrive when they are saddled with soaring health care costs and neither can our economy."
However, Bush campaign officials said that the president's plan to reduce health care costs would limit awards in medical malpractice lawsuits and that Kerry and his running mate Sen. John Edwards (N.C.) "are among those standing in the way" of such reforms, the AP/Globe reports (AP/Boston Globe, 8/19). Bush's health proposal would cost about $90.5 billion over 10 years and would expand health coverage to an estimated 2.1 million residents (American Health Line, 8/16).