Family healthcare costs continue to grow

The cost of healthcare in 2013 for a family of four receiving health benefits through an employer-sponsored preferred provide organization (PPO) now exceeds $22,000 per year, according to the Milliman Medical Index (MMI) published this week by consulting and actuarial firm Milliman Inc.

Of that total, employers still shoulder the majority of the healthcare cost burden, the report noted. Employers contribute $12,886 in subsidy payments for a family health plan, while the employee picks up the remaining $9,144 in the form of payroll deductions or other out-of-pocket expenses.

Notably, and as has been reported by both insurers and provider groups across the industry, the MMI showed a continuation of slowing cost increases. For 2013, Milliman said total costs increased by 6.3 percent, the third straight year of lower growth rates. Last year, total costs grew by 6.9 percent over the previous year – significantly lower than growth rates before the great recession, such as 2006 when costs grew by 9.6 percent.

"We were anticipating that the trend would continue to be ... a little bit down this year, but the extent to which there is still a substantial dollar increase to families is what is striking," said Lorraine Mayne, principal and consulting actuary with Milliman's Salt Lake City office and an author of the report.

That increase, despite the lowest growth rate in the nine-year history of the MMI, exceeded $1,300 for the fourth consecutive year.

While employers continued to provide significant subsidies for employee health plans – picking up 59 percent of the costs – Milliman noted that employee costs for their healthcare have grown faster than the employer share in five of the past six years. The changes include shifting a higher amount of premium costs to employees, as well as plans that have higher co-pays and deductibles.

"From year to year, benefit changes are made to the plans to try to help the employers to stay within their budget," Mayne noted. "So out-of-pocket (to employees) are increasing and that can be part of the difference."

In all, employers saw a dollar increase in costs for 2013 of $742 compared to employees who bore an increase of $560. Employee out-of-pocket costs grew by 3.4 percent and their premium contribution increased by an average of 8.4 percent.

And while employees continue to see the bite on their wallet increase faster than employer costs, employers continue to look for ways to address the ongoing overall cost growth of providing health benefits. To help staunch the growth in costs, employers are considering any number of plan changes including increased use of defined contribution plans, the use of public or private insurance exchanges, wellness programs with outcomes-based incentives, consumer-driven health plans and ACOs or other risk-sharing plan models.

"More and more, employers are looking at plan designs and delivery system arrangements that can reduce the total cost of care being provided rather than just having employees absorb more of the premium via payroll deductions and/or higher co-pays and deductibles," the report noted.