Health insurance costs are rising fast enough to erode the benefit of wage growth for American workers, while premiums for Affordable Care Act plans are set for another steep increase in 2027.
Pay and salaries rose 3.1% in the third quarter compared with a year earlier, according to the Bureau of Labor Statistics’ employment cost index. But employer contributions towards health insurance jumped 6.4% — the fastest rate in two decades, according to economist Guy Berger.
Berger, a senior fellow at the Burning Glass Institute, calculated that wage growth would be around 0.2 to 0.3 percentage points higher if employer health contributions had increased by 3%, as they did several years ago.
“That’s not a lot, but not nothing either,” Berger wrote.
The figures help explain why consumer confidence has weakened despite solid wage gains and a labour market described as being at full employment. Rising insurance costs are adding to pressure from higher petrol prices and utility bills, making it harder for households to feel the benefit of increased pay.
Berger said the data could understate the strain on employees, because employers’ contributions may not be keeping pace with the overall cost of health insurance.
“In other words, employees are paying a bigger share of premiums,” he said. He also said insurance plans were covering less, leaving workers with more expenses to pay out of pocket.
ACA premiums set for another sharp rise
People who receive cover through their employers are not the only Americans facing higher costs. Premiums for plans sold through the Affordable Care Act marketplace are expected to rise by 13% in 2027, according to the health research nonprofit KFF.
That would be the second-largest increase since 2018 and follows a 26% rise in 2026. The average monthly premium for a 40-year-old buying a mid-tier benchmark plan is expected to reach $704, up from $624 in 2026 and $497 in 2025.
The ACA market has faced additional pressure since Congress failed to renew enhanced subsidies introduced during the pandemic. Spending on medicines and hospital care has also increased.
ACA enrolment fell by 12% year on year as of February, to about 19.2 million people, with the industry indicating that more customers have since left because of higher premiums.
Those who dropped coverage were generally healthier, meaning the remaining pool of customers tends to be sicker and more expensive to insure. Insurers have also been withdrawing from the marketplace, reducing consumer choice: KFF recorded 31 state-level departures by insurers in late October, compared with eight additions.
KFF said some people who managed to retain cover in 2026 might no longer be able to afford it in 2027 as the market continues to deteriorate following the end of the enhanced premium tax credits.
