Health insurance premiums outpace workers’ pay 3-to-1 over last 25 years

Insurance premiums for employer-sponsored family coverage have climbed at roughly three times the pace of workers’ earnings over the past 25 years, according to research published Dec. 8 in JAMA Network Open. The study finds that hospital prices have risen faster than other major components of medical spending and remain a central force behind long-term cost growth.

Between 1999 and 2024, average worker contributions toward family premiums increased 308%, while total family premiums rose 342%.

Over the same period, average worker earnings increased 119% and overall inflation rose 64%.

The research letter — written by Salpy Kanimian, M.A., and Vivian Ho, Ph.D., both of Rice University’s Department of Economics — places those figures side by side to show how insurance costs have steadily pulled away from wages and general price growth for working-class families.

“For more than 160 million working people in the U.S. and their dependents, employer-sponsored health insurance is their primary means of accessing health care,” the authors wrote.

Hospital prices

To better understand what is pushing medical costs higher, the researchers analyzed Consumer Price Index (CPI) trends across four major categories of medical care: hospital services, professional services, prescription drugs and health insurance.

These trends were tracked from 2006, the first year CPI data for health insurance was made available, through 2024.

Hospital services showed the steepest and most persistent increase over that period, reaching a CPI index value of 193 by 2024. That means hospital prices were nearly double their 2006 level.

By comparison, professional services and prescription drugs rose at a slower, steadier pace.

Health insurance prices followed a different path. They were the most volatile category, climbing sharply during the COVID-19 pandemic and peaking at a CPI index value of 176 in 2022. By late 2024, the index had fallen back to 138 as utilization patterns normalized and CPI updates took effect.

The authors attributed that pandemic-era surge in insurance prices to a mix of disrupted care delivery, dramatic shifts in utilization — including fewer office visits early in the pandemic — and higher retained earnings for insurers during that period.

Even so, hospital pricing continues to stand out as the dominant long-term cost driver in the analysis, despite the fact that per-capita inpatient admissions have declined when outpatient visits are excluded.

Drug prices

While the prescription drug CPI showed more moderate overall growth, the study cautions that this measure reflects average retail-level price changes and may understate the burden faced by patients with chronic conditions.

The CPI prescription drug sample includes 350 to 400 drug molecules and does not distinguish between brand-name and generic medications or specific therapeutic classes. Because a drug’s chance of being included in the index is tied to its share of total pharmacy revenue, some high-cost medications with extreme price growth may be underrepresented.

To illustrate that point, the authors cited separate AARP Public Policy Institute data showing that prices for some top Medicare Part D drugs have increased by nearly 300% since entering the market.

Context, not causation

The analysis is descriptive rather than casual. The researchers indexed four indicators — total family premiums, average worker contributions toward premiums, average worker earnings and inflation — to their 1999 values to allow for direct comparison over time.

Premium and worker contribution data came from the Kaiser Family Foundation (KFF) Employer Health Benefits Survey. Inflation and wage data were drawn from the Bureau of Labor Statistics’ Consumer Price Index and the Current Employment Statistics Survey.

“Given the descriptive nature of this analysis, we cannot draw inference-based conclusions about whether changes in specific CPI components are driving premium increases,” the authors wrote. They emphasized that the findings should be viewed as broad context for understanding long-term trends, rather than proof of cause-and-effect relationships.

Separately, they noted that accurately measuring prices in a rapidly changing health care sector remains challenging.

The broader context

The study does not examine physician payment, but the widening gap between premiums and wages shows up every day in patient decision-making. As insurance takes a larger share of household income, patients are more likely to delay care, weigh out-of-pocket costs more carefully and make coverage choices that shape how and where they seek treatment.

For medical practices, those same pressures show up in shifting utilization patterns, changes in payer mix and greater sensitivity to deductibles and coinsurance at the front desk.

The financial stress tracked in national data often becomes a clinical conversation in the exam room.

After 25 years of premiums pulling further ahead of paychecks, the analysis finds no indication that those trends are converging. Hospital prices remain a central force in how health care costs are set for employers, workers and the practices that depend on those payments.