Health Premiums Are Eating Your Raise: Costs Up 6.4%, Wages Up 3.1%

Employer health insurance costs jumped 6.4% year-over-year in the third quarter — matching the fastest pace in two decades — while wages and salaries rose just 3.1%, according to the Bureau of Labor Statistics' employment cost index released Friday. That gap, according to economist Guy Berger, is quietly swallowing raises before workers ever see them.

Berger, a senior fellow at the Burning Glass Institute, calculated in a Substack post that if employer contributions had grown at 3% — the pace of a few years ago — wage growth would be running about 0.2 to 0.3 percentage points faster today. "That's not a lot, but not nothing either," Berger wrote.

For context, that lost increment is roughly a tenth of annual wage growth being diverted to insurance line items rather than paychecks. With many Americans already resorting to buy-now-pay-later plans for essentials, those fractions matter.

What is not in the official numbers?

Berger cautioned that the data likely understates the squeeze on workers. Employer contributions, he argued, may not be keeping pace with the actual cost of health insurance. "In other words, employees are paying a bigger share of premiums," he explained.

On top of that, plans themselves are covering less, forcing workers to pay more expenses out of pocket, Berger said. So the visible 6.4% figure may understate the true burden shifting onto households — a caveat worth holding against any rosy affordability claims this enrollment season.

The timing is pointed. Open enrollment season for health plans is about to begin, and many Americans face sticker shock on premiums. Insurance costs have joined gas prices and utility bills as drivers of voter anxiety about the cost of living ahead of the midterm elections.

That explains a puzzle in the macro data: despite consistently solid wage gains and a labor market at full employment, consumer confidence gauges have tumbled as overall affordability deteriorates. The BLS figures released Friday illustrate why workers are not feeling upbeat about their pay.

How bad is the ACA marketplace squeeze?

Workers with employer coverage are not alone. Premiums for Affordable Care Act plans will rise 13% in 2027, according to health-research nonprofit KFF, drawing on federal data released Friday. That is the second-biggest hike since 2018, and it follows a 26% jump in 2026.

The increase translates to a $704 average monthly premium for a 40-year-old buying a mid-tier benchmark Obamacare plan. That benchmark cost $624 in 2026 and $497 in 2025 — meaning the price has climbed more than 40% in two years.

KFF attributes much of the strain to Congress's failure to renew the enhanced subsidies enacted during the pandemic. Those subsidies expired, and ACA enrollment dropped by millions as people balked at higher premium bills.

The exits have skewed the risk pool. Most who dropped coverage were healthier, so those remaining tend to be sicker and drive premiums further upward — a classic adverse-selection spiral in slow motion.

As of February, enrollment in ACA plans had plunged 12% from a year earlier, to around 19.2 million people. The industry has indicated more have dropped out since then.

Are insurers walking away?

They are, in growing numbers. According to KFF, there were 31 state-level insurer departures from the ACA marketplace as of late October, versus just eight additions. Fewer carriers mean narrower choices for consumers, and thinner competition rarely lowers prices.

"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."

The takeaway in plain words: health inflation is now competing directly with wage growth, and unless premium growth cools or subsidies return, employers and workers will keep splitting a bill that grows twice as fast as pay.