Open enrollment season for health care plans is about to begin, and many Americans may get sticker shock after seeing how much premiums will rise.
But the rising cost of insurance is also quietly eroding wage gains, preventing workers from getting bigger raises than they would otherwise receive.
Health insurance costs are a major issue in the midterm election. In addition to higher gas prices and utility bills, insurance has stoked voter anxiety about the rising cost of living.
So despite consistently solid wage gains and a labor market that’s at full employment, consumer confidence gauges have tumbled as overall affordability deteriorates. Fresh economic data illustrate why workers aren’t feeling upbeat about more pay.
In the third quarter, wages and salaries increased 3.1% from a year ago, according to the employment cost index released by the Bureau of Labor Statistics on Friday.
But at the same time, employer health insurance contributions jumped 6.4%, matching the fastest pace in two decades, according to economist Guy Berger, senior fellow at the Burning Glass Institute.
In a Substack post, he calculated that if employer contributions had instead grown at 3%, which was the pace a few years ago, wage growth would be about 0.2-0.3 percentage points faster today.
“That’s not a lot, but not nothing either,” Berger wrote.
With many Americans resorting to buy now, pay later plans to buy essentials, even those incremental gains could make a big difference.
Berger added that the data likely understates the squeeze workers a facing, as employer contributions might not be keeping pace with health insurance costs.
“In other words, employees are paying a bigger share of premiums,” he explained.
On top of that, the insurance plans themselves are covering less, forcing workers to pay more expenses out of pocket, Berger said.
Americans who get health insurance through their employers aren’t the only ones feeling the pain. The cost of coverage via Affordable Care Act plans has also be surging.
In 2027, premiums will rise by 13%, according to health-research nonprofit KFF, which drew on federal data released Friday. That’s the second biggest hike since 2018 and follows a 26% jump in 2026.
The latest increase translates to a $704 average monthly premium for a 40-year-old purchasing a mid-tier Obamacare plan. Such “benchmark” premiums were $624 in 2026 and $497 in 2025.
While spending on drugs and hospital care is going up, the ACA market has come under particular strain since 2025, because Congress didn’t renew the enhanced subsidies that were enacted during the pandemic.
As a result, ACA enrollment has dropped by millions as people balked higher premium expenses. Since most who opted out were healthier, those remaining tend to be sicker and drive up premiums.
As of February, enrollment in ACA plans had plunged by 12% from a year earlier, or around 19.2 million people, and the industry has indicated more have dropped out since then.
Meanwhile, insurers are choosing not to participate in ACA marketplace, narrowing the choices for consumers. According to KFF, there were 31 state-level departures by insurers as of late October versus eight additions.
“Looking ahead to 2027, several insurers have said they expect the market to continue to deteriorate in 2027 as a continued result of the enhanced premium tax credits ending,” KFF said on Friday. “Some enrollees who were able to keep coverage in 2026 may no longer be able to make ends meet.”
Written by Jason Ma for Fortune as “Soaring health insurance costs are quietly preventing wages from rising higher, while workers also shoulder a larger share of premiums, economist says” and republished legally through syndication agreement with Reuters Connect.
