Health Care Costs To Increase For Families With Employer-Sponsored Health Coverage

The cost of health care forthe average U.S. family with employer-sponsored health coverage will increase7.6% this year, due in part to rising prescription drug prices, according to a Milliman study released on Wednesday, Dow Jonesreports. The fifth annual Milliman Medical Index analyzed historical claimsdata and trends in provider contracting and examined the drivers and componentsof medical spending. According to the study, the cost of medical services,including premiums, will increase by $1,109, from $14,500 in 2007 to $15,609 in2008 for an average family of four enrolled in an employer-sponsored PPO.

The study also found that the cost of pharmacy services is expected to increaseby 10.6% to $2,302, compared with single-digit increases for physicianservices, inpatient and outpatient care (Knight, Dow Jones, 5/14).Drug spending has slowed the past two years, according to the study. However,this year's increase is a trend that Milliman believes will continue, the Wall Street Journal reports (Fuhrmans, "Health Blog," WallStreet Journal, 5/14).

According to the study, employers are expected to pass on more of the cost totheir employees. Employers will shift around 10.5% more of the cost to workersthrough higher premiums and out-of-pocket costs, such as deductibles,copayments and coinsurance, the study found. Of the total $15,609 cost,employers will pay $9,442, while employees will spend $3,492 on premiums and$2,675 in out-of-pocket costs (Dow Jones, 5/14). In 2008,employers will pay roughly 60% of medical costs, while employees will pay 40%(Johnson, CQ HealthBeat, 5/14).

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According to studyco-author Lorraine Mayne, a Milliman principal and consulting actuary, this isthe second consecutive year employees' share of spending will increase bydouble digits (Dow Jones, 5/14). She added that the report is"likely to increase pressure on the next presidential administration toaddress health care costs" (Fuhrmans, "Health Blog," WallStreet Journal, 5/14).

Gary Brace, Milliman principal and study co-author, said, "This is a trendwe expect will continue for several years, as fewer high-volume drug patentsexpire," adding, "For many Americans, this rate of increase isexceeded only by fuel and certain food costs" (Dow Jones,5/14). According to CQ HealthBeat, "The study adds to theexisting gloom and doom related to medical costs as projections by federalanalysts show that health spending in the United States will double by2017" (CQ HealthBeat, 5/14).

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