2014 Milliman Medical Index - Milliman Insight

[/] Our Company Solutions Careers Insight Worldwide International Sites Choose a country and language Worldwide (English) North America United States (English) Latin America Brazil (Portuguese) Europe France (French) Germany (German) Ireland (English) Italy (Italian) Netherlands (Dutch) Poland (English) Romania (English) Spain (Spanish) Switzerland (English) United Kingdom (English) Asia Pacific Australia (English) India (English) Japan (Japanese) Japan (English) Korea (Korean) See office locations Contact Us News & Events Find Products & Services Analytics & Technology Healthcare Insurance Investment Retirement & Compensation Risk Management & Financial Services Our Company Who We Are Company History Contact Us News & Events Consultants Objectivity matters. Today, more than ever. Independent for over 60 years, Milliman delivers market-leading services and solutions to clients worldwide. With no agenda, other than getting it right. Through a team of professionals ranging from actuaries to clinicians, technology specialists to plan administrators, we offer unparalleled expertise in employee benefits, investment consulting, healthcare, life insurance and financial services, and property and casualty insurance. News 11 November 2014 — Wired The biggest risk facing insurers today? Old-guard IT 06 November 2014 — ThinkAdvisor Managing risk to create retirement income See all news Solutions Analytics & Technology Healthcare Insurance Investment Retirement & Compensation Risk Management & Financial Services STAR Solutions - NAVI Reduce risk calculation time and gain insight into risk exposure. CORAL: A roadmap for ACA CORAL helps you quickly estimate relative values of health benefit plans. InvestMap A sophisticated tool that enables DC plan sponsors to deploy an age-based, asset-allocation strategy. Careers Careers home Our People New Grads Experienced Hires Practice Areas Employee Benefits Financial Risk Management Healthcare Life Insurance Property & Casualty Working Here Unique Structure The Work Matters Life + Work Essentials Benefits Office Locations Common Questions Featured Jobs Actuarial Software and Client Services Consultant Atlanta, GA Benefits Analyst II Seattle, WA Benefits Analyst I Seattle, WA Healthcare Analytics / Data Scientist New York, NY All current job openings Expert thinking from Milliman. All articles and stories See all videos Sections Healthcare Employee Benefits and Investment Insurance Risk Management and Financial Services Featured Topics Analytics and modeling Enterprise risk management Healthcare costs Life insurance Solvency II Recent stories GASB 67/68: Proportionate share allocation Indonesia: New insurance bill passed in September 2014 Final rule issued on “excepted” benefits under the ACA Pension Funding Index November 2014 EIOPA proposal Guidelines on the preparation for Solvency II. 2014 Milliman Medical Index Print PDF Connect Email Facebook Twitter LinkedIn Google+ By Christopher S. Girod, Lorraine W. Mayne, Scott A. Weltz, Susan K. Hart | 20 May 2014 $23,215. That’s how much is spent in 2014 on healthcare for a typical American family of four covered by an average employer-sponsored health plan according to the 2014 Milliman Medical Index (MMI). 1 And yet while the amount has more than doubled over the past 10 years, growing from $11,192 to $23,215, the 5.4% growth rate from 2013 to 2014 is the lowest annual change since the MMI was first calculated in 2002. Download the report » click to enlarge Employers pay the largest portion of healthcare costs, contributing $13,520 per year, or 58% of the total. However, increasing proportions of costs have been shifted to employees. Since 2007, when the economic recession began, the average cost to employers has increased 52%—an average of 6% per year—while the expenses borne by the family, through payroll deductions and out-of-pocket costs, have grown at an even faster rate, 73% (average of 8% per year). Throughout this report we review the various components of the cost increases, how they are shared between employers and employees, and what key drivers are most likely to affect healthcare costs in 2014 and beyond. Key findings As measured by the 2014 MMI, the total annual cost of healthcare for a typical family of four covered by an employer-sponsored preferred provider plan (PPO) is $23,215 (see Figure 1). Key observations are: The MMI has more than doubled over the past 10 years (107% increase from 2004 to 2014), growing from $11,192 in 2004 to $23,215 in 2014. Although healthcare costs continue to rise, the overall annual rate of increase in the cost of care for the family of four is at its lowest level since we first calculated the MMI in 2002. During those years, the annual increase in cost ranged from a high of 10.1%, in both 2003 and 2004, to a low of 5.4% in 2014. The rate of increase dropped by nearly a full percentage point, from 6.3% in 2013 to 5.4% in 2014. As discussed later in this report, this significant decline was likely due to a confluence of forces rather than any single event. In almost every year of the past 10, growth rates have decelerated. Figure 2 shows the most recent five years of that deceleration. In each of the past four years, employees have assumed an increasing percentage of the total cost of care. The total employee cost (payroll deductions plus out-of-pocket expenses) increased by approximately 32% from 2010 to 2014, while employer costs (premium contributions) increased by 26%. Although the annual rate of increase is down, it is still well above the rate of growth in the consumer price index (CPI). 2 However, when and how future annual rates of increase will continue to change is unclear, and may depend on a number of factors such as: click to enlarge The economy Supply and demand influences Healthcare provider engagement in cost control Specialty pharmacy Transparency So far, the emerging reforms required by the Patient Protection and Affordable Care Act (ACA) have had little direct impact on the cost of care for our family of four in 2014 because this family tends to be insured through large group health plans. Some of the most far-reaching reforms are focused on access to insurance in the individual and small employer markets. Additionally, while the reforms are having immediate impacts on premium rates in those markets (the individual market, in particular), it is unclear whether they will ultimately have meaningful effects on growth in the cost of healthcare services. Additional resources Milliman Medical Index archives Understanding healthcare costs: The employer-sponsored insurance system The story behind the Milliman Medical Index 1 The Milliman Medical Index is an actuarial analysis of the projected total cost of healthcare for a hypothetical family of four covered by an employer-sponsored preferred provider organization (PPO) plan. Unlike many other healthcare cost reports, the MMI measures the total cost of healthcare benefits, not just the employer’s share of the costs, and not just premiums. The MMI only includes healthcare costs. It does not include health plan administrative expenses or profit loads. 2 Over the 10-year period from 2004 through 2014, CPI has increased by approximately 2.3% per year, while the MMI has average annual increases of 7.6%. Download the PDF Authors Christopher S. Girod San Diego, CA, US Tel: +1 858 5878400 View bio Christopher S. Girod , FSA, MAAA Principal, Consulting Actuary San Diego, CA, US Tel: +1 858 5878400 Read more>> View bio E-Mail | VCard Lorraine W. Mayne Salt Lake City, UT, US Tel: +1 801 9241390 View bio Lorraine W. Mayne , FSA, MAAA Principal, Consulting Actuary Salt Lake City, UT, US Tel: +1 801 9241390 Read more>> View bio E-Mail | VCard Scott A. Weltz Brookfield, WI, US Tel: +1 262 7842250 View bio Scott A. Weltz , FSA, MAAA Principal, Consulting Actuary Brookfield, WI, US Tel: +1 262 7842250 Read more>> View bio E-Mail | VCard Susan K. Hart Houston, TX, US Tel: +1 713 6588451 View bio Susan K. Hart , FSA, MAAA Principal, Consulting Actuary Houston, TX, US Tel: +1 713 6588451 Read more>> View bio E-Mail | VCard Healthcare Healthcare costs Healthcare reform Medical professional liability Medicare/Medicaid See all topics Healthcare Healthcare costs Healthcare reform Medical professional liability Medicare/Medicaid Employee Benefits and Investment Defined benefit plans Defined contribution plans Investment Insurance Analytics and modeling Catastrophe risk and insurance-linked securities Life insurance MPL Property and casualty insurance Risk management Solvency II Risk Management and Financial Services Enterprise risk management Related links Final rule issued on “excepted” benefits under the ACA Legality of ACA subsidies: What does the Supreme Court’s recent decision to hear this case mean for health plans? Cost-sharing reduction subsidies: Financial impact of the simplified methodology Actuarial considerations of medical malpractice evaluations in M&As Obesity in a commercially insured population: An analysis of NHANES data Connect with Milliman Twitter @millimaninsight @millimaneb @millimanhealth @millimancareers LinkedIn Google+ YouTube Blogs Healthcare Townhall Retirement Townhall The Business of Risk Risk and Solvency About Milliman Our Company Who We Are Company History Contact Us News & Events Consultants Solutions Analytics & Technology Healthcare Insurance Investment Retirement & Compensation Risk Management & Financial Services Careers New Grads Experienced Hires The Work Matters Life + Work Current Job Openings Insight Healthcare Employee Benefits and Investment Insurance Risk Management and Financial Services For more than six decades, Milliman has combined technical expertise with business acumen to create elegant solutions for our clients. Today, we are helping companies take on some of the world's most critical and complex issues, including retirement funding and healthcare financing, risk management and regulatory compliance, data analytics and business transformation. Copyright information Terms of use Privacy policy