An Economic Alliance for Michigan report finds both workers, businesses squeezed by health care costs

Mounting evidence shows that ever-rising health care costs hurt not only employers, but Michigan working families and ultimately the overall economy, according to a report released (October 2015) by the Economic Alliance for Michigan (EAM), the state’s only business-labor coalition.

The EAM report, “Rising Health Care Costs and the Economy, Focus: State of Michigan,” compiles government data and the findings of more than two-dozen economic studies to document the cause and impact of rising health care costs. The report comes as lawmakers in Michigan and across the country grapple with how to boost the economy as health care costs continue to burden businesses and workers.

“The findings suggest that unless health care costs are contained, Michigan employers will struggle to create jobs and increase wages, leaving Michigan’s working middle-class families struggling for years to come,” said Bret Jackson, president of EAM, a bipartisan coalition formed in 1982 to improve the economic climate for both workers and businesses in Michigan. “Michigan’s leaders must strategically address rising health care costs to stop or at least ease this disastrous drain on the economy.”

According to a Harris Poll commissioned by Castlight Health and included in the EAM report, 90 percent of company leaders said they could invest more in their business if the company’s health care costs were lower, and 93 percent agreed the rising cost of health care gives foreign companies a competitive advantage.

About 53 percent of Michigan residents have employer-sponsored health insurance, and employers here are struggling to meet rising premium costs by reducing the number of new hires and limiting wage increases, the report notes. Most businesses are also shifting premium costs to employees.

The median average family income in Michigan grew just 0.4 percent between 2008 and 2013, while the cost of the average family insurance premium rose nearly 35 percent and the employee’s share increased 57 percent, according to the federal Agency for Healthcare Research and Quality.

“The average Michigan family effectively made less in 2013 than in 2008, which is no surprise to the thousands of Michigan workers trying desperately to make ends meet,” Jackson said.

For employers, rising health care costs mean that for every four employees making $45,000 annually, the employer pays more than $46,000 in health care premiums, federal Agency for Healthcare Research and Quality data show.

“The amount those employers spend on premiums alone is equal to the salary of an additional employee, but that money obviously can’t be spent on hiring,” Jackson said. “That’s one fewer job the employer can create.”

With more spending going to health care, less money goes to other important sectors of the state’s economy, the report shows.

In metro Detroit, for example, health care spending rose 59 percent between 2007 and 2013, while spending on entertainment grew just 13 percent; spending on household furnishings grew just 4 percent; and spending on apparel and services declined 15 percent, according to the U.S. Bureau of Labor Statistics.

“Health care costs are an incredible burden on the average working family in Michigan with limited assets, putting them at risk for bankruptcy if they’re hit with a major health crisis,” Jackson said. “The pressure of rising health care costs on employees, employers and ultimately on the economy is unsustainable – for everyone.”

Read the full report: EAM Study Rising Health Care Costs and the Economy