Average 2008 employee out-of-pocket costs for family health care to increase 10.5%, according to Milliman Index

May 19 2008

The cost of health care for the average U.S. family with employer-sponsored health coverage will increase 7.6% this year, due in part to rising prescription drug prices, according to a Milliman study released on Wednesday, Dow Jones reports.

The fifth annual Milliman Medical Index analyzed historical claims data and trends in provider contracting and examined the drivers and components of medical spending. According to the study, the cost of medical services, including premiums, will increase by $1,109, from $14,500 in 2007 to $15,609 in 2008 for an average family of four enrolled in an employer-sponsored PPO.

The study also found that the cost of pharmacy services is expected to increase by 10.6% to $2,302, compared with single-digit increases for physician services, inpatient and outpatient care (Knight, Dow Jones, 5/14). Drug spending has slowed the past two years, according to the study. However, this year's increase is a trend that Milliman believes will continue, the Wall Street Journal reports (Fuhrmans, "Health Blog," Wall Street Journal, 5/14).

According to the study, employers are expected to pass on more of the cost to their employees. Employers will shift around 10.5% more of the cost to workers through higher premiums and out-of-pocket costs, such as deductibles, copayments and coinsurance, the study found. Of the total $15,609 cost, employers will pay $9,442, while employees will spend $3,492 on premiums and $2,675 in out-of-pocket costs (Dow Jones, 5/14). In 2008, employers will pay roughly 60% of medical costs, while employees will pay 40% (Johnson, CQ HealthBeat, 5/14).

Comments

According to study co-author Lorraine Mayne, a Milliman principal and consulting actuary, this is the second consecutive year employees' share of spending will increase by double digits (Dow Jones, 5/14). She added that the report is "likely to increase pressure on the next presidential administration to address health care costs" (Fuhrmans, "Health Blog," Wall Street Journal, 5/14).

Gary Brace, Milliman principal and study co-author, said, "This is a trend we expect will continue for several years, as fewer high-volume drug patents expire," adding, "For many Americans, this rate of increase is exceeded only by fuel and certain food costs" (Dow Jones, 5/14). According to CQ HealthBeat, "The study adds to the existing gloom and doom related to medical costs as projections by federal analysts show that health spending in the United States will double by 2017" (CQ HealthBeat, 5/14).

The study's findings are available online.