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Health insurance cost increases slow, no thanks to prescription drugs

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The percentage increase in the average cost of employer-provided health insurance for family coverage registered its smallest gain since 2001, Milliman Inc. said Tuesday, but specialty drugs remain a concern, and employees' share of costs continues to rise.

In its “Milliman Medical Index,” the Seattle-based consultant and actuarial firm said the total cost of coverage, which includes plan premiums and out-of-pocket expenses, such as deductibles and copayments, for a family of four rose 4.7% to an average of $25,826 this year.

While that is less than the 7.8% average annual increase over the past 15 years and the smallest percentage gain since Milliman launched the analysis in 2001, it is the 11th consecutive year that the cost increase for family PPO coverage has exceeded $1,100. The cost for family coverage has risen 25% in just four years, according to the report.

“This is a combination of good and bad news,” said Chris Girod, a San Diego based Milliman principal and consulting actuary.

The good news, he said, is that cost increases are moderating as employers seek ways to keep costs more under control.

“We seem to be making progress in wrestling the curve down to sustainable levels,” according to the analysis of employer clients of the firm.

The report notes that employers are examining value-based insurance design. For example, employers might eliminate copayments for prescriptions that treat chronic medical conditions to try to change employees' and their families' behavior.

“In turn, the expectation is that an investment like this will result in better management of conditions, fewer inpatient admissions or (emergency room) visits, lower costs and better health outcomes,” the report said.

On the other hand, Mr. Girod said, prescription drug costs continue to far outpace other health care costs.

This year, prescription drug costs jumped an average of 9.1% versus the 4.7% overall increase in health plan costs. At an average of $4,270 per family, prescription drugs account for nearly 17% of the total cost of coverage, Milliman said.

Indeed, the costs of specialty drugs, which Medicare defines at those that cost more than $600 per prescription, now comprise 35% of total prescription drug costs and 6% of total health care spending.

“Specialty drugs are “are very expensive with few generics available,” Mr. Girod said.

In all, employers paid just over 57%, or $14,793, of health plan costs this year, according to the analysis, while employees paid an average of $6,717 in premium contributions and $4,316 in out-of-pocket expenses. By contrast, in 2001, employers paid 61% of total plan costs and employees paid 39%.

“It's evident that employees are taking on an increasing proportion of health care costs,” Sue Hart, a Milliman principal and consulting actuary in Houston, said in a statement.