2012 family PPO cost posted smallest increase since 2004: Milliman

The average increase in medical costs for families enrolled in employer-sponsored preferred provider organizations was just 6.3% in 2012, according to a report that Seattle-based Milliman Inc. released Wednesday.

On average, employer-sponsored PPO coverage for a family of four cost $22,030 in 2012, with employers' share of those costs totaling an average $12,866. While the 2012 figure is the highest average in the eight years that Milliman has been conducting its annual study, the 6.3% over average costs paid in 2011 was the slowest rate of year-over-year expense growth in the study's history.

It marks the second consecutive year in which the study has revealed record high family medical costs and a record low rate of growth for those same costs.

According to Milliman's findings, cost-sharing between employers and their employees remained relatively flat in 2012. Approximately 58% of the average family's annual medical costs were subsidized by an employer last year, compared with 59% in 2011.

“While both employers and employees share the burden of financing annual cost increases, our study shows that (in 2012) employees continue to take on a growing share of the overall costs,” Scott Welz, principal and consulting actuary at Milliman's Milwaukee office said in a statement accompanying the report.

Researchers for Milliman indicated in the report that the reduced year-over-year growth rates in medical costs over the past several years were driven in part by a depressed demand for nonurgent health care that resulted from lagging employment coupled with a rise in employers shifting some health care costs onto their employees.

Other factors contributing to the tempered growth of medical costs since 2010 could include increased provider integration, wider adoption of electronic medical record systems and other health care delivery efficiencies.

The study also noted that the passage of the Patient Protection and Affordable Care Act has, to date, not had a material effect on the average cost of employer-sponsored PPO coverage for families.

However, Milliman researchers noted, it remains unclear how health care and health insurance prices will react to the implementation of several of the health care reform law's landmark provisions next year.