Moneybox

We’re Getting Ripped Off

Emergency room
American medicine is indeed in a state of emergency.
Alexandra Drago/Reuters

In 2019, the average price of health insurance rose above $20,000 for families that obtain their coverage through work. That’s according to the latest survey of employer benefits from the Kaiser Family Foundation, which found that premiums increased by 5 percent for the second year in a row.

Much of that cost was invisible to workers, who only paid $6,015 directly toward their own premiums on average (up 8 percent from the year before). Employers footed the rest.

Kaiser Family Foundation graph of employer contributions to premiums and total family coverage
Kaiser Family Foundation

These numbers are grotesque. Insuring a single family for a year costs almost as much as a Honda Civic. This fact should be a subject of daily outrage, and it probably would be if more workers realized just how much of their compensation is devoured by the cost of health care. After all, every dollar a company pays to Aetna or Cigna is a dollar it might otherwise be able spend on salaries and wages.

And yet, I don’t think these stats alone quite capture the full absurdity of the situation we now find ourselves in. Thanks to the escalating costs of employer-based health insurance, Americans are already paying enough to fund a European-style welfare state. Instead, we’ve settled for a system where, if you’re not careful, the emergency room might charge you $629 for a Band-Aid.

Let’s start with taxes. Officially, Americans don’t pay very much of them. But that picture changes dramatically if you count private insurance premiums as a tax on labor. If you do, Matt Bruenig of the People’s Policy Project has found that U.S. workers are some of the most highly taxed in the world—ahead even of the French and Finns, who, unlike us, get a decent welfare state with universal coverage as part of the bargain.

Graph of labor taxes and compulsory payments as percent of average wage in different countries
People’s Policy Project

Some might argue that it’s misleading to treat insurance premiums as taxes since, technically, nobody is forced to buy coverage (R.I.P. individual mandate), and many employers offer relatively inexpensive options, like high-deductible plans. But the reality is that most people don’t feel they have much choice about whether or not to buy insurance, and having premiums deducted from your paycheck every two weeks is functionally the same as paying a tax. (This is a point Bernie Sanders likes to bring up when arguing for single payer.)

Now let’s look at the overall size of our weird, semi-privatized welfare state. This year, the Organisation for Economic Co-operation and Development released an updated analysis of social expenditures across the developed world—essentially, the money countries devote to things like health care, cash support for families, old age pensions, unemployment insurance, and other benefits. If you only count government spending, the U.S. ranks a bit below most other rich countries, as you might expect. We lay out about 21 percent of our gross domestic product on these benefits, well below France (28 percent) or Belgium (25 percent), and similar to Japan (21 percent). Once you include some forms of private spending such as health care premiums, however, the U.S. moves near to the front of the pack.

Publicly mandated spending OECD
The OECD’s definition of “publicly mandated social expenditures” covers public benefits as well as private social spending, such as on health insurance premiums, that is required under law. It included much of U.S. health care spending in this category because the data is from 2015, when Obamacare’s individual mandate was in effect.
Jordan Weissmann/Slate

If you account for the vast amounts of money we channel into employer-based health insurance, it turns out that Americans are taxed like Europeans and spend on social welfare like Europeans. And in return, we get a system where hospitals regularly sue patients and parents have to worry about getting hit with a several-thousand-dollar surprise medical bill if they decide to take their feverish kids to the ER. We get ripped off.