Christopher S. Girod, Lorraine W. Mayne, Scott A. Weltz | 22 May 2013
Last year, when healthcare costs for the typical American family of four exceeded $20,000 for the first time, the Milliman Medical Index (MMI) compared the cost of a family’s healthcare to the cost of an average midsize sedan. This year, with costs exceeding $22,000 ($22,030), we note that other major purchases are also comparable to the annual cost of healthcare. For example, the cost of attending an in-state public college is $22,261 for the current academic year.1
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The total share of this cost borne directly by the family—$9,144 in payroll deductions and out-of-pocket costs—now exceeds the cost of groceries for the MMI’s typical family of four.2 The out-of-pocket cost alone—$3,600 for co-pays, coinsurance, and other cost sharing—is more than the average U.S. household spends on gas in a year.3
Whether our family fully realizes the degree to which total healthcare costs eclipse so many other household costs is another question. The employer pays a significant share of our typical family’s healthcare cost; some of these costs are not visible in the family budget. But for four of the last five years, our family has seen a larger percentage increase in costs than the employer. Our typical family is well aware of the increasing cost of care, even if it is only responsible for paying 41 cents of every healthcare dollar.
Specific findings
As measured by the 2013 MMI, the total annual cost of healthcare for a typical family of four covered by an employer-sponsored preferred provider plan (PPO) is $22,030.
- The 6.3% increase over 2012 is the fourth consecutive year of decreasing trends, but the total dollar increase of $1,302 is the fourth year in a row of increases over $1,300.
- Of the $22,030 healthcare cost for a family of four, the employer pays about $12,886 in employer subsidy while the employee pays the remaining $9,144, which is a combination of $5,544 in payroll deductions and $3,600 in employee out-of-pocket costs. For employees, this represents a cost increase of 6.5% compared with last year’s total employee cost of $8,584.
- Is this pattern of lower rates of increase over the past four years a sign that America is “bending the cost curve?” It is difficult to pinpoint a single cause of the slowing rates of increase, as a number of factors may be influencing trends. Possible explanations include the economy, provider integration, and a shortage of new “blockbuster” drugs coming online.
- We expect that the emerging reforms required by the Patient Protection and Affordable Care Act (ACA) will have little impact on the cost of care for our family of four in 2013 because this family tends to be insured through a large group health plan.
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