Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Your Raise Is Finally Beating Health Insurance Costs
Transcript
- Lucas: If you've opened your benefits enrollment email this year and actually felt okay about the numbers, you're not imagining things—your raise may finally be beating health insurance costs. Luna: That's a big claim, Lucas. Health insurance premiums have been outpacing wage growth for, what, like two decades? Lucas: Yeah, nearly. But the latest data shows a real shift. Average hourly earnings for private workers hit thirty-seven sixty in June, up three-point-four percent year-over-year. Meanwhile, the medical care component of CPI—which includes premiums, but also doctor visits and hospital services—is only up two-point-one percent. That gap is meaningful. Luna: So for the first time in a while, the raise is actually covering the healthcare cost increase and then some. But is that true for everyone? I mean, employer-sponsored plans vary wildly. Lucas: Right—this isn't a blanket victory. The CPI number is a broad average. But what's driving the moderation is interesting. A lot of employers have been shifting to high-deductible health plans with lower premiums, and that's pulling down the overall premium growth. Also, the inflation spike we saw in 2021-2022 is fading from the base. Lucas: Speaking of what's making this show possible—if walking through the economy with us has made something click, honestly, if today was worth a coffee to you, that's the link. It's buy me a coffee dot com slash fexingo. Keeps the show ad-free and independent. Luna: Yeah, we don't run ads, so listener support is what keeps us going. And it really does help. Lucas: Back to the data—the June payrolls report also showed a cooling labor market, only fifty-seven thousand jobs added, unemployment at four-point-two percent. That might actually be helping wages catch up, because employers have to compete harder to retain workers. Luna: Right, so in a softer job market, you'd think wage growth would slow. But it's held at around three and a half percent, while health cost inflation has decelerated more sharply. Lucas: Exactly. And this isn't just about premiums—the overall medical care CPI includes things like dental services, eyeglasses, hospital stays. But what matters for most workers is what comes out of their paycheck for health insurance. The Kaiser Family Foundation found that average annual worker contributions for single coverage grew about three percent in 2025, down from five percent in 2023. Luna: So the trend is real. But I wonder if this is sustainable. If healthcare costs start accelerating again, we could lose that advantage. Lucas: That's the big question. Ten-year breakeven inflation is still around two-point-two-four percent, so the bond market expects inflation to stay contained. But healthcare has its own dynamics—new expensive drugs, hospital consolidation, aging population. Still, for right now, the math is on the worker's side. Luna: And what about those who aren't in employer-sponsored plans? People on the individual market or Medicaid—are they seeing any relief? Lucas: That's a different story. The CPI for health insurance actually weights employer plans heavily, so it's more reflective of the group market. Individual marketplace premiums have been more volatile, especially with policy changes around subsidies. But the broader point is that for the typical full-time worker, the squeeze is easing. Luna: I think that's worth celebrating, but also a reminder to check your own numbers. Not all raises are created equal. Lucas: Absolutely. If you got a three percent raise but your premium went up five percent, you're still behind. But on average, the trend has flipped. And that's a shift we haven't seen in a long time.