The cost of health care for American families in employer-sponsored preferred provider plans continues to rise, albeit more slowly, according to the 2017 Milliman Medical Index released by Milliman, Inc., a Seattle-based consulting and actuarial firm.
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The cost of health care for the typical American family of four in an average PPO plan is $26,944, compared to $25,826 in 2016. While the dollar amount remains high, the index’s annual rate of increase is 4.3 percent, the lowest rate since the firm began tracking the MMI in 2001.
The report’s authors attributed the slowing pace to a concomitant slowing of rate increases in hospital spending, professional services costs and pharmaceutical costs.
“Proactive medical management can also lower costs by ensuring that the right amount of care is provided in the least intensive, lowest cost, and yet medically appropriate, treatment settings,” the authors write. “For example, providers may deliver more of their care on an outpatient basis, and order fewer diagnostic tests and prescriptions. Narrow network plans may favor such providers who use care management techniques to better coordinate care and minimize unnecessary utilization of services.”
For the first time since 2013 and 2014, the typical family of four’s prescription drug trends have decreased in two consecutive years, though the prescription drug cost increase of 8 percent is more than double the medical increase of 3.6 percent, according to the report.
The authors attribute the slowing pace due to a number of factors: Heightened public scrutiny has caused numerous drug manufacturer chief executives to take the “price hike pledge” to hold price increases below 10 percent; some pharmacies are reducing the prices of certain drugs so they can participate in preferred pharmacy networks, in hopes of driving in-store sales of non-pharmacy products that provide higher profit margins; and the use of drug rebate programs is rising -- though the impacts of such programs can be elusive for the typical patient if the rebate occurs after the point of sale and is paid back to the plan administrator and not the patient.
“Rebates paid after the point of sale effectively operate like reverse insurance, requiring some of the highest-cost patients to pay more out-of-pocket and then spreading the savings among all health plan members in the form of lower premium rates,” the authors say.
“Given these complicated issues, PBMs are responding by coming out with programs that embed manufacturer rebates in point-of-sale pricing at the pharmacy to directly benefit consumers who spend the most on prescription drugs.”
The report also says employees now pay for about 43 percent of health care expenses and employers pay the other 57 percent. The difference between these two shares has gradually narrowed since 2001, when employees contributed 39 percent and employers contributed 61 percent.
The authors note health care providers receive higher payment for patients in employer-sponsored plans for the “exact same basket” of services, than they do for other insured patients.