ECONOMIC REPORT OF THE PRESIDENT

productivity on the job. These benefits, while not as readily quantifiable as
the benefits discussed below, are also important.
Higher Wages, Lower Premiums, and Lower Out-of-Pocket Costs for
Workers
Roughly half of Americans see the benefits of a more efficient health
care system in the form of lower costs for the coverage they get through
an employer. Health care for individuals enrolled in employer coverage is
financed through a combination of premiums and out-of-pocket costs, so
when the underlying cost of health care falls, premiums and out-of-pocket
costs fall as well. Reductions in out-of-pocket costs and the portion of
premiums paid by employees accrue directly to workers. The remaining savings,
which initially accrue to employers as lower premium contributions,
ultimately benefits workers as well; economic theory and evidence demonstrate
that reductions in the amounts employers pay toward premiums
translate into higher wages in the long run (for example, Summers 1989;
Baicker and Chandra 2006).
The slow growth in health costs under the ACA has generated substantial
savings for workers. The average premium for employer-based
family coverage was nearly $3,600 lower in 2016 than it would have been if
nominal premium growth since 2010 had matched the average rate recorded
over the 2000 through 2010 period, as estimated using data from the KFF/
HRET Employer Health Benefits Survey and illustrated in Figure 4-45.
Incorporating data on out-of-pocket costs makes these savings considerably
larger. Combining these KFF/HRET data on premiums with data on out-ofpocket
costs from the Household Component of the Medical Expenditure
Panel Survey using the methodology described in Figure 4-34 implies that
the average total spending associated with an employer-based family policy
is $4,400 lower in 2016 than if trends had matched the preceding decade.35
As noted above, both economic theory and evidence imply that workers
will receive the full amount of these savings in the long run. In practice,
however, compensation packages take time to adjust, so it is conceivable
that some of employers’ savings on their portion of premiums have not
fully translated into higher wages in the short run. To the extent that is the
case, then slower growth in health care costs has had the effect of reducing
employers’ per-worker compensation costs in the short run, increasing their
incentives to hire and potentially boosting overall employment. The empirical
evidence on these effects is limited, but some studies have found evidence
35 As depicted in Figure 4-39 and discussed in the main text, different data sources report
somewhat different trends in the out-of-pocket share. However, this calculation is not very
sensitive to which data source is used.
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