How will employer health insurance affect wages and Social Security finances?

Chen, Anqi, Alicia Haydock Munnell, and Diana Horvath. “How will employer health insurance affect wages and Social Security finances?”. CRR WP 2023-12, Chestnut Hill, Mass.: Center for Retirement Research at Boston College, September 2023. http://hdl.handle.net/2345/bc-ir:109798.
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Abstract

The rising cost of employer contributions to employee-sponsored health insurance (ESHI) can slow wage growth and erode the Social Security wage base. Both these effects were evident in the decades before 2005, as ESHI increased as a share of compensation. Fortunately, the ratio of ESHI contributions to compensation plateaued after 2005, stabilizing wages and halting the erosion of the share of labor compensation subject to Social Security's taxable base. The question is whether the stabilization of employer contributions as a share of compensation is temporary or permanent. The analysis used the Medical Expenditure Panel Survey (MEPS) to determine why ESHI contributions rose as a share of compensation prior to 2005 and why this ratio stabilized in recent years. These findings, combined with some speculation about the impact of the Affordable Care Act (ACA) and the COVID pandemic, are used to project the ratio of ESHI to compensation over the next decade.

Title
How will employer health insurance affect wages and Social Security finances?
Author
Chen, Anqi
Munnell, Alicia Haydock
Horvath, Diana
School
Carroll School of Management
Discipline
Finance
Center
Center for Retirement Research
Genre
working paper
Date Issued
September 2023
Publisher
Center for Retirement Research at Boston College
Series Title
CRR WP
Series Number
2023-12
Persistent Link
http://hdl.handle.net/2345/bc-ir:109798
Use Restrictions
These materials are made available for use in research, teaching and private study, pursuant to U.S. Copyright Law. The user must assume full responsibility for any use of the materials, including but not limited to, infringement of copyright and publication rights of reproduced materials. Any materials used for academic research or otherwise should be fully credited with the source. The publisher or original authors may retain copyright to the materials.
Subject
Social Security

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