Milliman, May 2013
The MMI represents the projected total cost of medical care for a hypothetical American family of four (two adults and two children) covered under an employer-sponsored PPO health benefit program.
* 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% over last year’s total employee cost of $8,584.
* 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. Some of the most far-reaching reforms will not become effective until 2014, and they are focused primarily on the individual and small employer markets. Additionally, while those reforms will likely have immediate impacts on premium rates in those markets, it is unclear whether they will have any near-term effects on growth in the cost of healthcare services for a given person.
By Don McCanne, M.D.
According to the Milliman Medical Index (MMI), the average projected cost for health care today for the typical family of four with an employer-sponsored preferred provider plan (PPO) is $22,030. That includes an employee contribution to the premium of $5,544, out-of-pocket expenses of $3,600, both totaling $9,144, plus an employer contribution of $12,886 which is actually paid by the employee through forgone wage increases.
Median annual household income is now $51,404 (February 2013). Although that does not represent the same demographic group as working families with four members, it does give you a general perspective of the burden of today’s health care costs on families and households.
An important point made in the MMI report: “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,” and ACA is “focused primarily on the individual and small employer markets.” Since employment remains the primary source of health care coverage, the majority of families can anticipate little relief from these health care cost burdens.
A fundamental flaw in employer-sponsored coverage is that the entire burden of health care costs is placed on the employee (when considering forgone wages), yet it is clearly not affordable for low- or middle-income families. Progressive financing of health care is an imperative.
ACA provides at least modest income-indexed public subsidies which extend into the middle-income ranges, though they are still inadequate. Premiums for employer-sponsored plans are tax deductible, which is a form of public subsidy (tax expenditure), but since the premiums represent forgone wages, this tax subsidy benefits higher-income individuals much more than those with lower incomes. Thus the financing of health care through employer-sponsored coverage is terribly regressive (lower-income families pay a much larger percentage of their income for health care than do higher-income families).
This outrageous $22,000 burden on typical working families should be enough to provide us with an incentive to fix our health care financing system. A single payer national health program that includes everyone and is financed with progressive taxes is precisely what we need. Keep in mind this $22,000 burden when you discuss health care reform with others. ACA is not going to make that go away.