The 2016 Milliman Medical Index

Actuarial firm Milliman regularly measures the average cost for health coverage for an American family of four enrolled in an employer-sponsored PPO plan.  The 2016 report of the Milliman Medical Index was recently released.  (Milliman Report)   The total average cost for such a family in 2016 is $25,826, a 4.7% increase over 2015.  The rate of increase is the lowest since the Index was begun, but still much higher than family income growth.  The employee’s portion of that cost is an average $11,033, or up 5.3%, while the employer’s cost rose only 4.2%.  Over the last 15 years the employee contribution has steadily crept upward, to the point where it is now 43% of the total cost.  The total cost has more than tripled in 15 years, averaging 7.8% annually.  The average amounts contributed by employees mask very wide variation.  Some families may have very limited use of health services, which means their costs would largely be limited to premium contributions and occasional copays.  Others families may have one or more members with serious illnesses, which could lead to very high cost-sharing, such as needing to meet an annual deductible.  The largest single of bucket of cost in that annual average of $25,826 is inpatient care at 31%, but it is followed closed by physician and other professional services at 30%, then hospital outpatient at 19% and drugs at 17%.  As we have seen in other research, drug spending is the most rapidly growing category, at 9.1%, while physician and clinical services rose only 2.5%.  The report discusses a variety of approaches to limit continued growth in spending in employer-based plans, but the likelihood for the foreseeable future is both that total health spending in this arena will grow faster than the economy or personal income and that the employee share of the spending will continue to rise as well.