Health Care Costs Soar for Insured U.S. Workers

Average Family Medical Expenses Nearly $1200 More in 2009 than 2008

May 31, 2009

A family of four covered by employer-sponsored health insurance now incurs $16,771 per year in medical expenses, which represents a 7.4% increase over 2008 costs.

The 2009 Milliman Medical Index (MMI) reports that a typical family of four in the U.S. that is covered by an employer-sponsored preferred provider organization (PPO) insurance plan will run up almost $17,000 in medical expenses in 2009, compared to $15,609 in 2008.

The MMI report, which has been released annually for the past five years, measures the average annual medical spending for a family covered by an employer-sponsored PPO program. According to the report, "The MMI provides a consistent benchmark of healthcare benefit costs by annually assessing the changes in those costs over the most recent five-year period."

Distribution of Medical Costs

The MMI report looks at key components of medical spending over time. The total costs include the amount that the family pays for out-of-pocket expenses as well as what the benefit plan pays out. The MMI report estimates health care expenses in 2009 for an average family of four based on the following five spending categories:

When inpatient and outpatient expenses are considered together, they represent 47% of the total annual medical costs, far more than physician services. In fact, according to the MMI report, "Physician services now represent a smaller portion of total healthcare costs than they did five years ago."

Trend in Medical Cost Increases

Despite the grim totals that the MMI report has provided, the rate of increase in the last five years was actually at its lowest. That's not to say that a 7.4% increase is not excessive, but compared to the preceding years, as shown in the following bullets, it's an improvement.

Clearly, a 7.4% increase is not as bad as 9.1%, but it is an increase nonetheless. Add to this the trend toward greater cost-sharing on the part of the employee, and families are paying more out-of-pocket medical expenses than ever.

In fact, according to the MMI report, this is the third consecutive year in which there has been a double-digit percentage increase in the amount that employees and their families are spending for health care services. Currently, employers contribute about 59% of the total for medical expenses and the employee about 41%, which includes out-of-pocket expenses as well as employee contributions to the insurance plan.

Health Care Costs Across the U.S.

Although the 2009 medical expenses for a typical family of four total $16,771, this represents a nationwide average, with some parts of the country spending more and others spending less. For example, the 2009 medical costs for a family in Miami are $20,282, 120.9% over the national average. In Phoenix, on the other hand, a family's medical costs are $14,857, over 11% lower than the national average.

Despite the discrepancies in costs among the various geographical regions, the trend is the same throughout the country. Medical expenses are rising and it is becoming increasingly difficult for employees and their employers to afford effective health care, leaving many families unprotected.

According to the MRI report, which takes a five-year view of medical costs, "There is now agreement on the need for some form of healthcare reform - in that time, the cost of healthcare for a family of four has risen from $12,214 to $16,771. The MMI is 37% higher than when we started publishing these results in 2004." If ever there were a time to act, it is now.

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