Typical Health Costs for American Family Exceed $20,000

By Stephen Miller, CEBS May 17, 2012

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.

Cost Sharing

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 Costs

In 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:

  • An 8.2 percent cost increase in payroll deductions.
  • A 5.8 percent increase in out-of-pocket costs.

"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


















Washington, D.C.



Los Angeles





















Source: 2012 Milliman Medical Index.

Types of Services

Among additional key findings from the 2012 index:

  • Outpatient cost increases, at less than 9 percent, were single digit for the first time in four years. But outpatient costs still exhibited the highest rate of increase of major categories of care.
  • Hospital inpatient care, up 7.6 percent (average charge per day), also exceeded the overall cost trend rate of 6.9 percent and accounted for nearly as much in total dollars as physician care.
  • For pharmacy expenses, the cost trend increase of 7.3 percent was lower than in 2011 as a result of the continuing increases in the availability of generic drugs. High-cost "specialty drugs" are expected to have an increasing impact on health care spending in the future, according to Milliman, but they remain a minor portion of costs in 2012.
  • Physician cost increases were up 5 percent—less than the overall cost increase trend.

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.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

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