The cost of employer-provided health insurance has increased three times faster than workers’ earnings over the past 25 years, according to a new study from Rice University that helps explain why coverage is becoming less affordable for many families.
Published in JAMA Network Open, the study analyzes changes in health insurance costs and the consumer price index since 1999. It finds that rising hospital prices are the primary driver of higher insurance premiums.
Between 1999 and 2024, workers’ contributions to family health insurance premiums rose by 308 percent, while total premiums increased by 342 percent. By contrast, wages grew by 119 percent over the same period, and overall inflation rose by 64 percent.
The study also notes that during the COVID-19 pandemic, health insurance prices climbed nearly as fast as hospital costs, before stabilizing in subsequent years.
A breakdown of health care price trends shows that hospital services experienced the steepest increases. By 2024, the cumulative price index for hospital services reached 194 relative to 2006. Price indices for insurance premiums, professional services, and prescription drugs were significantly lower, ranging from 138 to 145.
Vivian Ho, the James A. Baker III Chair in Health Economics at Rice University’s Baker Institute for Public Policy, said the findings highlight the role of medical service costs in shaping insurance premiums.
“When consumers see escalating health insurance premiums, they often assume insurers are at fault,” Ho said. “But premiums must reflect the underlying cost of care, and hospital prices are rising faster than those of any other providers.”
First author Salpy Kanimian, a doctoral candidate at Rice University, pointed to hospital consolidation as a key factor behind rising prices.
“Research shows that mergers and acquisitions have strengthened the bargaining power of large health systems,” Kanimian said. “With fewer alternatives available, insurers and patients are forced to accept higher hospital prices, which ultimately feeds into higher insurance premiums.”
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