As business leaders, workers and Congress watch health care and health insurance rates skyrocket, and growing numbers of Americans become uninsured, the current U.S. health care is proving itself a significant competitive disadvantage for U.S. companies. According to a recent report from the New America Foundation, U.S. competitiveness is being threatened by ever-increasing health care costs.

The report illustrates the binding effect an employer-based system has on global competitiveness. The responsibility employers have of providing health insurance in the U.S. continues to be a significant fiscal drain, and despite the claims of many that those costs are merely shifted to the consumer, prices in the global marketplace prevent businesses from doing so.

The report, authored by Len Nichols and Sarah Axeen found that—as a percentage of payroll—the employer cost of health benefits has exploded over the past few decades. Employer health costs for manufacturing firms in the United States, which were $2.38 per worker per hour, were much higher than the foreign trade-weighted average of $0.96 per worker per hour in 2005. This significant discrepancy hands U.S. employer a significant disadvantage in their ability to manage costs.

The report went on to note that the percentage of payroll spent on health insurance contributions has steadily increased to 9.9 percent in 2006—compared with just over one-percent in 1960—exceeding the amount they contributed to employee Social Security taxes. However, roughly two-fifths of U.S. firms do not offer health care coverage, and when those firms are excluded from consideration, the average employer costs for health insurance coverage rise to 11.5 percent of payroll.

Nichols and Axeen state that high health care costs are often reflected in the price of goods, and cite the estimation of American automobile manufacturers that employee health insurance costs add $1,500 to the price of a car. The increased burden U.S. employers bear in providing health insurance—far more than their major trading partners—undermines U.S. competitiveness in the global marketplace.

To view the full report, please click here.