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In 2012, the average cost of care for a typical American family of four receiving health care through an employer-sponsored preferred provider organization (PPO) plan was $20,728, according to the
2012 Milliman Medical Index. While the 6.9 percent increase over 2011 was the lowest rate of increase in the 10 years of this study, the $1,335 increase surpassed 2011’s dollar-level record of $1,319.
"The average rate of increase this year dips below 7 percent 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, a global consulting and actuarial firm. "This helps illustrate the challenge of controlling health care costs. When the total cost is already so high, even a slower rate of growth has a serious impact on family budgets," she noted.
In 2012, 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, according to Milliman.
Relative Proportions of Medical CostsIn 2012, for a family of four in an employer-provided PPO plan:
Breakdown of costs
Percentage of total
Employer premium contribution
Employee premium contribution
Employee out of pocket
Source: 2012 Milliman Medical Index.
The 6.7 percent increase in the employer's portion of costs was slightly less than the overall health care cost increase trend of 6.9 percent. Correspondingly, the 7.2 percent growth in the employee's share of costs was slightly more than the overall cost trend. The employees' share of costs reflects:
"Some families may be surprised to hear their total average health care costs are exceeding $20,000 this year," said Scott Weltz, consulting actuary with the Milwaukee office of Milliman. "While everyone knows the cost of health care is increasing, most people who receive health insurance through their employer are insulated from the true costs associated with the care they receive."
Of the 14 U.S. cities for which claims data was analyzed, the average cost of care for the typical family in all but three of the cities exceeded $20,000 in 2012. Miami was the most expensive at $24,965, while Phoenix was the least expensive at $18,365.
Milliman Medical Index
Cost Increase vs. National Average
New York City
Types of Services
Among additional key findings from the 2012 index:
Uncertainty Over Reform
The May 2012 release of the index fell during an uncertain time for American health care as the nation awaited the outcome of the U.S. Supreme Court's decision on the Patient Protection and Affordable Care Act (PPACA). "To date, PPACA has had only a limited effect on health care costs for families covered by an employer-sponsored PPO plan," according to the index report. Longer term, the implications for costs—positive and negative—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.
is an online editor/manager for SHRM.
SHRM Online Health Care Reform Resource Page
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