Healthcare Town Hall

American Medical News looks at the cost drivers underlying this year’s average of $20,728 in healthcare costs for a typical American family of four. Here is an excerpt:

Milliman breaks down the model family’s health care spending by category: physician services, inpatient stays, outpatient care and pharmacy costs. Spending on physician services grew at the lowest rate of any of the care components in the Milliman index, Mayne said, and that’s been true for several years.

“Some of the other categories are catching up,” she said. As a result, physician services now account for 32% of the medical index, at $6,647 — but inpatient hospital expenses were nearly as high a share, at $6,531.

So that’s what’s underlying the cost increases. What are the downstream implications for employers and the employees receiving insurance through their employer? CNN/Money delves into that question:

Over the past five years, 40% of working adults have seen their employer-sponsored benefits reduced or eliminated entirely, according to a survey by the National Endowment for Financial Education, or NEFE.

Harris Interactive conducted the survey on behalf of the nonprofit, polling 2,210 adults in the U.S. — more than half of whom were employed.

An overwhelming majority, or 72%, of those who saw their benefits cut said their health insurance coverage was hardest hit, NEFE said. As employers cut back, employees shouldered more costs, including higher deductibles and co-pays, as well as more expensive premiums.

This year, workers’ out-of-pocket costs rose 5.8% to an average of $3,470 for a typical family of four, according to data compiled by independent actuarial and health care consulting firm Milliman Inc.

The trend of employees taking on more of the cost share is not new and has persisted more often than not in recent years. Just roll back the calendar one year and consider what we posted last May 31.

Cost Lorraine Mayne, Milliman Medical Index, MMI

Lorraine Mayne speaks with AM Best about the Milliman Medical Index and offers some perspective on what is driving this year’s healthcare cost increase.

Cost Lorraine Mayne, Milliman Medical Index, MMI

Milliman today released the results of its 2012 Milliman Medical Index (MMI), which measures the average healthcare costs for a typical American family of four receiving healthcare through an employer-sponsored preferred provider organization (PPO) plan. The average cost of care for this typical family in 2012 is $20,728. While the 6.9% increase over 2011 is the lowest rate of increase in the 12 years tracked by the MMI, the $1,335 increase surpasses last year’s record of $1,319.  

“The average rate of increase this year dips below 7% for the first time since we began analyzing these costs, but the total dollar increase is still the highest we have seen,” said Lorraine Mayne, principal and consulting actuary with the Salt Lake City office of Milliman. “This helps illustrate the challenge of controlling healthcare costs. When the total cost is already so high, even a slower rate of growth has a serious impact on family budgets.”

The MMI’s release date falls during an uncertain time for American healthcare, with the nation awaiting the outcome of the U.S. Supreme Court’s decision on the future of the Patient Protection and Affordable Care Act (PPACA). To date, the PPACA has had only a limited effect on healthcare costs for families covered by an employer-sponsored PPO plan; longer term, the implications may be more pronounced, and will depend on a number of dynamic and interrelated factors.

“We face a number of different potential scenarios depending on the future of reform,” said Chris Girod, principal and consulting actuary with the San Diego office of Milliman. “With this year’s MMI we have tried to map out what those different scenarios may mean for consumers, employers, care providers, and the government.”

As has been the case in prior years, this year’s analysis examines several key medical cost components:

• The MMI includes analysis of healthcare costs in 14 cities, thereby showcasing the role that geography plays in healthcare costs. This year, the average cost of care for the typical family in all but three of these cities exceeds $20,000. Of the 14 cities analyzed, Miami is the most expensive, at $24,965, while Phoenix is the least expensive, at $18,365.
• The MMI examines how employers and employees share the cost of healthcare. This year employers will on average contribute $12,144 of the $20,728 total while employees—through payroll deductions and out-of-pocket expenditures—will pay the remaining $8,584.

 
“Some families may be surprised to hear their total average healthcare costs are exceeding $20,000 this year,” said Scott Weltz, consulting actuary with the Milwaukee office of Milliman. “While everyone knows the cost of healthcare is increasing, most people who receive health insurance through their employer are insulated from the true costs associated with the care they receive.” 

To view the complete MMI, click here.

Cost Chris Girod, Lorraine Mayne, Milliman Medical Index, MMI, Scott Weltz

Consumer Operated and Oriented Plans (CO-OPs), the not-for-profit health plans envisioned in the PPACA, have been gaining traction, with CMS announcing hundreds of millions of dollars in loans to help establish such plans in Maine, Oregon, South Carolina, Iowa, Nebraska, Montana, New Jersey, New Mexico, Wisconsin and New York.

Milliman recently started a newsletter on CO-OPs. The first issue encouraged CO-OPs to learn from history and avoid pitfalls common to all new insurance plans. Milliman produced a briefing on CO-OPs back in July of 2011. For quick access to all the Health Care Town Hall posts on CO-OPs, use this link.

Reform co-op, Courtney White, Healthcare Reform, Lorraine Mayne, Shelley Moss

CNN/Money offers a preview of the upcoming Milliman Medical Index (MMI). While the MMI isn’t out until later this spring, one thing is for sure: In 2012, healthcare costs for the typical American family of four will exceed $20,000. Here’s what CNN/Money had to say:

The cost to cover the typical family of four under an employer plan is expected to top $20,000 on health care this year, up more than 7% from last year, according to early projections by independent actuarial and health care consulting firm Milliman Inc. In 2002, the cost was just $9,235, the firm said.

The projected increase marks the fifth year in a row that health care costs will rise between 7% and 8% annually.

While employers still shoulder a majority of health care expenses, employees have been paying a larger portion of the total amount every year, according to Lorraine Mayne, principal and consulting actuary with Milliman.

You may be wondering where the Supreme Court deliberations fit in all of this.

Even if the Affordable Care Act goes through, it will do little to lessen the financial burden for those who are already insured, Mayne said. “It will take other changes to really bend the cost curve and make substantial changes in health care costs,” she said.

The full CNN/Money article is available here.

UPDATE 3/30: And the Huffington Post got in on this, too. Here’s their coverage:

$20,000: That’s what a typical family covered by job-based health insurance will spend on health care this year, according to research by the consulting firm Milliman.

This year is the first time family health care spending is projected to surpass $20,000, said Jeremy Engdahl-Johnson, a spokesman for Milliman. A typical family spent less than half that on health care just 10 years ago, data from Milliman show. Health care costs have increased by 7 percent to 8 percent each year since 2008, CNN reported today.

Milliman’s report, due to be published in May, is the latest in a seemingly endless series of studies, surveys and reports pointing out that U.S. health care spending is growing out of control, which won’t come as news to people paying for health insurance and medical care. Another recent study projected that health care costs will eat more than half our income by 2037 if the trend isn’t slowed.

Check back in May for the 2012 Milliman Medical Index

Cost Lorraine Mayne, Milliman Medical Index, MMI

The 2011 Milliman Medical Index reported that an employee’s out-of-pocket contributions at the time of service grew from $3,005 in 2010 to $3,280 in 2011 for a typical family of four.  The chart below shows which components of medical care result in that cost sharing at the time of service. 

The largest portions are for inpatient and physician, comprising 32% and 31%, respectively, of the total cost sharing.  Pharmacy and outpatient are approximately half those amounts at 17% and 16%, respectively.

Cost Lorraine Mayne, Milliman Medical Index

The Milliman Medical Index continues to show up in the press (here it is on an MSNBC blog and in the Kansas City Star). For those who want more perspective on what the MMI is and how we arrive at these numbers, check out this video with MMI author Lorraine Mayne.

Cost Lorraine Mayne, Milliman Medical Index

A new video examines key actuarial and operational considerations for state health insurance exchanges. The video includes perspectives from the CFO of the Massachusetts Health Connector and from several actuaries.

Reform adverse selection, Clark Slipher, Diane Laurent, Ed Cymerys, Jean Yang, Lorraine Mayne, Massachusetts, Mike Sturm, risk adjustment, state exchanges, Stuart Rachlin, Tom Snook

The Milliman Medical Index indicates that 2010 medical costs for the typical American family of four are proceeding at a familiar rate. Modern Healthcare has the story:

The survey predicted that healthcare reform would not have a material effect on large-group benefit costs in 2010. “The cost of group insurance continues to increase at a historically consistent pace, even with reform now the law of the land. While there will be short-term cost implications, especially for particular employees and certain employers, this year reflects a continuation of the prevailing cost trends,” said study co-author Lorraine Mayne, Milliman principal and consulting actuary.

As we noted yesterday, the annual rate of increase only accelerated slightly—but the total dollar increase sets a new record.

Kaiser Health News picks up on the Modern Healthcare story and others.  And there’s this from UPI.

Cost Lorraine Mayne, Milliman Medical Index

Most of the attention is focused on the Senate Finance Committee in anticipation of its bill. But before figuring out how that as-yet-unseen bill can be reconciled with the bills already introduced by the Senate HELP Committee and House Tri-Committee, it may be useful to examine some* of the implications of the drafted legislation on large employers. New analysis by Milliman principals Lorraine Mayne and Robert Schmidt does just that, looking at the impact of a mandate, insurance reforms, and other provisions specific to employers. 

Here is one of many quick analyses on the implications, this one looking at the individual mandate (emphasis in original). 

Individual Responsibility. The AHCA and AAHCA both have provisions that would penalize individual taxpayers who do not participate in “qualifying coverage.”  This provision would not appear to have a major impact on employers that do not have significant groups of employees that currently opt-out of coverage.  However, employers may need to adjust their benefit plan options to meet the “qualifying coverage” requirements.

See the full briefing paper.

* Note that in the interest of getting into some of the finer details (and not letting the elephant in the room take up all of the oxygen) this analysis punts on looking at the public plan.

Employers, Mandates, Reform Lorraine Mayne, Robert Schmidt