What follows is excerpted from the new health reform briefing paper, Understanding Healthcare Plan Costs and Complexities.
Total cost depends on a number of factors that begin with plan design and then take into account specific characteristics of the population insured. Factors can include age, gender, and other demographics as well as health status and habits. Tables 2 and 3 give a sense of the range of costs associated with different people across different plan designs. There are several ways to compare cost, including the per-member per-month (PMPM) measure often used by insurers and other plan sponsors.
Table 2 calculates the cost of the various plans relative to the Milliman Medical Index plan, based on cost levels expected for a cross-section of the U.S. labor force population (including spouses and dependent children). As this table shows, the HDHP plan we have defined has benefit costs that are about half those of the comparison MMI plan, while the HMO-style benefits would produce expected costs that are 15% higher than the MMI(before any savings due to care management).
Table 3 compares PMPM cost levels between the overall average for the U.S. labor force (including workers, spouses, and children) versus those for a 30-year-old male and for a 60-year-old female. The expected cost under the MMI plan for the 30-year-old male would be just more than half the overall average; and the expected cost for the 60-year-old female would be more than two-and-a-half times the overall average.
While conventional wisdom acknowledges that people become more expensive as they get older, the degree to which they do so is not always appreciated. For example, the expected cost under the MMI plan for a 60-year old female would be more than four-and-a-half times that for a 30-year old male. Also, recognize that these are averages for the age. Obviously, a 60-year-old with chronic conditions can be expected to experience significantly higher costs than shown here.