A report issued Monday by Milliman indicated that the cost of health care for a typical American family covered by the average employer-sponsored preferred provider organization (PPO) plan in 2018 is $28,166, as per the Milliman Medical Index (MMI).
Broken down into component parts, this represents the following costs:
2018 MMI Components of Spending
31% ($8,631) – Inpatient
19% ($5,395) – Outpatient
29% ($8,275) – Professional services
17% ($4,888) – Pharmacy
4% ($995) – Other (Home health, ambulance, DME, prosthetics)
The key takeaway from the report is that employers are paying more; but employees are paying a lot more.
The health care expenditures are funded by employer contributions to health plans and by employees through their payroll deductions and out-of-pocket expenses incurred when care is received, according to the report.
The report continues that they are seeing over the long-term, and that employees are paying a higher percentage of the total, with employee expenses increasing 5.9%, and employer expenses increasing 3.5% in 2018.
The total cost of health care is shared by both the employer and employee for a family of four, the MMI stated, which breaks down to three categories:
1. Employer subsidy. Employers that sponsor health plans subsidize the cost of healthcare for their employees by allocating compensation dollars to pay a large share of the cost.
2. Employee contribution. Employees who choose to participate in the employer’s health benefit plan typically also pay a substantial portion of costs, usually through payroll deduction.
3. Employee out-of-pocket cost at time of service. When employees receive care, they also often pay for a portion of these services via health plan deductibles and/or point-of-service copays.
The relative proportions of medical costs for 2018 are:
56% ($15,788) – Employer contribution
27% ($7,674) – Employee contribution
17% ($4,704) – Employee out-of-pocket
Looking at this another way, employees are paying a total of 44% as either a contribution or out-of-pocket, which adds up to $12,378, compared to the employers’ 56% and $15,788, respectively.
As health care gets more expensive, it will naturally lead to higher costs for employers, but also higher costs for employees. And as has been happening more commonly, employers are shifting more of the costs onto the employees. With stagnant wages, as reported daily in the news, this is going to be a problem for those families caught in the squeeze between rising costs for medical care and stagnant wages.
This would be resolved by creating a single payer health care system that will save both employers and employees money,