Every year health actuarial firm Milliman calculates the average cost of employer-sponsored health care coverage for a family of four with a typical PPO plan. (MMI Report) The number never goes down, it is just a matter of how much will it have gone up by. For 2018, the estimate is the cost will be $28,166. Think about that for a minute, it is a huge number, with the price born by both the employer and the employee. The increases have been continual over time, rising 4.5%, or $1,222. While this is one of the lowest increases in the index’ history, it is well above general inflation. Over 18 years, the average increase has been 7.4%. Employees are picking up a growing share of these costs. In 2018, the employee portion is rising 5.9%, compared to 3.5% for the employer contribution. On average, employers paid $15,788 or 56% of the plan cost. Employees paid the remainder, 27% as premium contributions and 17% as out-of-pocket spending, for a total of almost $12,500. That is a lot of money out of a family’s budget.
Of the total cost, $8631 or 31% is for inpatient care; $5395 or 19% is for hospital outpatient services; $8257 or 29% is for physician and other professional services and $4888 or 17% is drug costs. The proportion that goes to drugs has risen steadily, while physician services as a percent has declined and total hospital spending has grown rapidly. Some explanations for why the general trend for several years has been lower rates of cost growth include greater engagement of providers in cost-control efforts via financial incentives; plan designs, such as higher deductibles, reference pricing and drug copay tiering; and spillover effects from government program efforts to limit costs. Looking at these statistics explains why health care continues to be such a potent political issue. The financial pain to the average family is real. And to me, it all stems from a misguided notion that everyone needs comprehensive health insurance and from allowing providers, and health plans, to engage in grossly anti-competitive market consolidation.