Policy director Phillip Longman argues that linking employer-sponsored health insurance rates to Medicare prices could significantly reduce hidden healthcare costs, thereby increasing workers' take-home pay and improving their standard of living.

According to exit polls, the top reason voters gave for not supporting Kamala Harris was inflation. Yet by the time of the election, official measures showed that inflation had moderated to historical norms. Meanwhile, other conventional economic indicators showed that wages had been rising far faster than prices for the previous two years. So why were so many voters convinced that their standard of living was falling? 

Here’s one factor that has been largely overlooked. Everyone complains about the high price of drugs and hospital stays. But few people are aware of how hidden health care costs that don’t show up in the Consumer Price Index are profoundly eroding their purchasing power. 

To understand how this giant rip-off works and how to fix it, you need some background. Most working- and middle-class Americans receive their health care coverage through employer-sponsored insurance plans. Most of us covered by such plans know full well that we are perpetually being asked to pay higher deductibles and co-pays. Most of us also know when our premiums go up. Individual workers covered by such plans typically pay around 20 percent of the cost of the premium in the form of a paycheck deduction. Workers who insure a spouse and two children under an employer plan typically see about 32 percent of the cost of the premium deducted from their paycheck. 

But here’s what most people miss. They think their employer pays the rest, which is true, but only literally. Your employer does send a check to the insurance company, but it’s a shell game. Any economist will tell you that workers in an employer-sponsored plan pay nearly all the cost of their benefits, and that it’s a very, very big number. This year, according to the Milliman Medical Index, for a typical middle-aged worker who enrolls their spouse and two children in a typical employer-sponsored family plan, the annual cost of their insurance has reached a staggering $32,066. 

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