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2012 Milliman Medical Index

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By Christopher S. Girod, Lorraine W. Mayne, Scott A. Weltz | 15 May 2012

Healthcare costs for American families in 2012 exceed $20,000 for the first time

The annual Milliman Medical Index (MMI) measures the total cost of healthcare for a typical family of four covered by a preferred provider organization (PPO) plan. The 2012 MMI cost is $20,728, an increase of $1,335, or 6.9% over 2011. The rate of increase is not as high as in the past, but the total dollar increase was still a record. This is the first year the average cost of healthcare for the typical American family of four has surpassed $20,000.

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Key considerations

Our family of four is insured by an employer-sponsored PPO plan, which includes certain out-of-pocket costs such as copays and deductibles. The plan’s premiums are paid jointly by the employer and by the employee via payroll deductions. Healthcare benefits are a substantial portion of the employee’s compensation.

Our family of four may be surprised to learn that their annual healthcare costs are nearing $21,000, because their own out-of-pocket costs, at an average of $3,470, are the portion of the cost of care most visible to them. Some employees may also be acutely aware of the $5,114 in payroll deductions. This brings the employee’s total share to $8,584.

While the annual rate of increase fell below 7% for the first time in the 12 years tracked by the MMI, the total dollar amount of the increase overshadows any relief that consumers might derive from the slowing percentage increase.

As of the release date of this report, the nation is awaiting a U.S. Supreme Court decision on the future of the Patient Protection and Affordable Care Act (PPACA). To date, PPACA has had only a limited effect on total healthcare costs for the MMI’s illustrative family of four. With the MMI release in between the Supreme Court deliberations and its decision, we are left with more uncertainty about the future of healthcare costs than usual. As we examine the different components of the MMI, we offer considerations for the future both with and without reform.

Specific findings

  • Between 2011 and 2012, the MMI increased $1,335, just surpassing the record $1,319 increase set between 2010 and 2011.
  • But there is a silver lining: The 2012 increase in the MMI cost moderated to 6.9%, marking the second year in a row the percentage increase has reached a new low since the inception of the MMI.
  • This year the 6.7% increase in the employer’s portion of costs was slightly less than the overall trend of 6.9%. The 7.2% growth in the employee’s share of costs was slightly more than the overall trend of 6.9%. This latter number includes an 8.2% cost increase in payroll deductions and a 5.8% increase in out-of-pocket costs.
  • Of the cities profiled by the MMI, the most expensive was Miami, at $24,965, and the least expensive was Phoenix, at $18,365. Phoenix is one of three of the 14 cities studied by the MMI whose cost for our family of four remains below $20,000.