The other day a reporter asked me what one statistic I thought best showed small business’s problems with the U.S. health care system. After thinking about it for a while, I decided that it’s this one: Since 1999 the average cost of employee health insurance premiums (for family coverage) has risen 84 percent in inflation adjusted terms (148 percent in nominal terms).
In the figure above, I chart the trend in the cost of premiums for family coverage at small businesses, using data from the Kaiser Family Foundation’s annual survey on employer health benefits. Statistically, an upward sloping straight line (included in the chart) fits the data pretty well.
To understand why this is a problem, consider what has happened to the average business’s revenues since 1999. The Internal Revenue Service (IRS) only provides data on business revenues through 2008.
But between 1999 and 2008, the revenues at the average American company fell 5 percent in inflation-adjusted terms. Over the same period, employee health care premiums went up 64 percent when measured similarly.
The rapidly rising cost of employee health insurance means that the cost of health insurance has increased from 5.4 percent of total worker compensation in 1999 (PDF) to 7.7 percent in 2012 (PDF), according to Bureau of Labor Statistics data.
You don’t need an economics Ph.D. to see why for why these numbers are frightening to small business.