American Businesses: They Are Not the Piggybank We Imagine
Companies with at least 50 full-time employees in the United States must provide their workers with affordable healthcare coverage. Many employers require that workers’ pay a part of the expense as long as the employee’s monthly premium is less than 9.96 percent of their household income.
As an aside, 9.96 percent is an amazing number. Under existing law, the government considers a health insurance plan “affordable” if a worker’s share of the monthly premium amounts to less than 9.96 percent of the household’s annual income. A big question then is if our country ever gets to the point where we do have universal healthcare, should we ask our citizens to pay 9.96 percent of their household income into a health insurance plan? After all, many households are paying close to that amount in premiums and out-of-pocket expenses right now.
As for company sponsored plans, those with deductibles have an average deductible of $1,886 a year for a single person. In addition, many plans have copays and coinsurance requirements. The average coinsurance rate for some group plans is 20% for each hospital admission.
The end result is that in 2024, American households paid about 51 percent more in healthcare expenditures than businesses did.1 It doesn’t seem fair, so is it possible for businesses to step up to the plate and finance a bigger portion of our nation’s healthcare system?
The short answer is probably “no.”
A study by the Brookings Institute notes that in the United States, companies contract out with insurance carriers to provide health insurance coverage at a fixed dollar amount per worker, regardless of the worker’s wages or earnings. In 2019, the average group health insurance premium cost companies about $12,000 a year for one employee.
The Brookings study notes that lower-paid non-college graduates are less likely to sign up for employer sponsored health insurance, in part, because they may have to pay a part of the premium. It is harder for a lower paid worker to make contributions than it is for a higher paid worker.
Brookings suggests that financing health insurance premiums instead with a payroll tax where workers pay proportionately to their income would increase wages and employment opportunities for non-college graduates at the expense of higher skilled, college educated workers. Overall, there would be a net job increase.
A payroll tax, though, has its own set of problems. A 2024 study on payroll taxes used to. collect unemployment insurance found that when the government increased payroll taxes, companies hired fewer employees as a result. Those especially hard hit were younger workers and businesses operating out of a single location.
Meanwhile, a Congressional Budget Office study notes that at least in the long run, companies have long foisted any payroll tax burden onto employees via lower wages and compensation. The CBO study breaks new ground by showing that with any new payroll tax increase (i.e.—say to finance universal healthcare), that about 58% of the additional tax burden would come out of employee pockets in the short run—not long run. Companies could save money, for instance, by reducing staff working hours or requiring employees to pick up the pace.
In 2024, federal data shows that companies financed $967.4 billion in healthcare expenditures, approximately 18.3% of our nation’s total.2 It is doubtful that we can get businesses to pay more.
Notes:
1My math to show that households paid about 51 percent more in healthcare expenditures:
(1,458.9 – 967.4) ÷ 967.4 = 50.8%
Source: Centers for Medicare & Medicaid Services, National Health Expenditure Accounts, 2024, Tables 5-1 and 5.2.
2Source: Centers for Medicare & Medicaid Services, National Health Expenditure Accounts, 2024, Tables 3 and 5-1.