As part of a study of widening income gaps between U.S. households, the McKinsey Global Institute and McKinsey's Social Sector Office found that recent trends in health care costs, health care coverage, and household income have resulted in growing disparities between different income groups in the United States.
The research finds that rising employer-paid health insurance premiums constitute a growing share of the combined income of lower-paid employees—a much larger share than for those who are higher paid. For those workers within the bottom-income group who are insured (22 percent), the ratio of employer-paid premiums to household income is 20 percent. That compares with 3.3 percent for the top-income group, in which nine out of ten workers are insured.
Rising health care costs, reflected by spiraling insurance premiums, are widening the discrepancies between income groups in both the levels of enrollment in employer-paid health schemes and insured workers' ability to afford premiums and out-of-pocket health care costs. Employee contributions to insurance premiums have also been rising, discouraging some from taking up their employers' insurance offers altogether. Such responses to rising premiums have resulted in stagnating or falling rates of enrollment in employer-paid schemes—a trend that has particularly affected middle-income employees. Put another way, employers are spending more on health care per employee but for fewer employees. In 2005, employer-paid health benefits covered 22 percent of households in the bottom-income group, contrasted with 56 percent of the lower-middle, 81 percent of the upper-middle, and 89 percent of the top-income group, the research finds.
Because incomes across the four groups of workers have been growing at such different rates in recent years, the average employer-paid premium for a worker in the top 10 percent was more than double the average for someone in the lowest 30 percent of income earners. Gaps in the extent of employer-paid health care services offered to employees at different income levels have thus widened. Employees benefiting from higher premiums receive a proportionately wider choice of health care goods and services.
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