Rising Health Care Costs Mean less Pay, Fewer Raises, Lost Jobs These hidden costs have a huge effect on your financial well-being By: Michael Zielenziger | Source: AARP Bulletin Today | October 16, 2009 Bruce Richmond always intended to offer health insurance to his 14 employees who manufacture thermal hearth pads that fit underneath pellet stoves and fireplaces. “My wife and I consider it a moral obligation to try to provide health care to our employees if we can,” he says, even though neither his Chinese nor Canadian competitors are burdened by health care costs. Richmond’s Hearth Classics plant in Sandy, Ore., is a classic mom-and-pop manufacturing business that’s now staggering under the rising costs of its employee health care plan. Each year, Richmond’s insurance premiums for employee coverage keep mounting: a 17 percent increase in 2006, another 29 percent in 2007. Over the past eight years premiums have increased 138 percent, which far outpaces his ability to raise prices to his customers. As the price of employee insurance goes up, the level of coverage Richmond can afford for his workers goes down. Last year, Richmond reluctantly asked his workers to shoulder a quarter of their own health insurance costs, a bill that effectively reduces the take-home pay for some of his blue-collar workers by as much as 15 percent. Now, like many Americans, his workers are paying more for less coverage. Health care costs up, raises down The rising costs of the health insurance Richmond buys for his workers substantially restricts his ability to give those workers a raise. “It is a pay cut for my employees,” he says, or a raise they didn’t get. The sharp spikes in health care costs also make Richmond less likely to hire new workers since offering health care “raises the cost of hiring someone substantially,” he says. As Congress debates reforms designed to expand insurance coverage and slow the rising cost of health care, business executives and economists say the crippling annual increases in insurance premiums are a silent tax on American workers and the companies that hire them. Today the average premium for employer-sponsored health insurance is $13,375 a year for family coverage, with employers paying nearly 75 percent, or $9,860, according to a new study by the Kaiser Family Foundation. “We can’t sustain this broken system,” says Richmond. “I sure hope something happens.” “All my clients are struggling to deal with this,” says Matt Swinnerton, a broker who sells health care plans to businesses for the Precept Group in San Ramon, Calif. Rising health care costs, he says, are “the silent killer of compensation for employees.” Permitting premiums to continue to climb unchecked “is simply unsustainable for families, for businesses, for state budgets and for our national economy,” Vice President Joe Biden said in a September speech to state insurance commissioners in the Washington suburbs.