The cost curve is bending because of increased provider engagement, more effective provider contracting, value-driven plan design and spillover effects from public program initiatives. (Photo: Shutterstock)

There is good news and bad news for the average American family’s health care costs, according to the 2018 Milliman Medical Index.

The good news: The cost of health care for a typical American family of four receiving coverage from an employer-sponsored preferred provider plan will rise by just 4.5 percent this year, the eighth year in a row that the annual rate of increase has been lower than the average 7.4 percent rise for all of the 18 years that the index has been measured. Only last year was lower, at 4.3 percent, but this year’s index shows that as the MMI’s dollar amount continues to grow, the rate at which it grows is clearly slowing.

The bad news: The MMI increased by $1,222 from 2017 to 2018. For more than 10 years now, the MMI has been increasing at an average of just over $100 per month.

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“There are two ways of looking at this year’s MMI,” says Chris Girod, a co-author of the index. “On the one hand it’s heartening to see the rate of healthcare cost increase remain low. On the other hand, we’re still talking about more than $28,000 in total health care costs for the typical American family.”

Key stakeholders across the health care system told Milliman that the cost curve is bending because of increased provider engagement, more effective provider contracting, value-driven plan design and spillover effects from public program initiatives, says Sue Hart, another MMI co-author.

The index also found that prescription drug trends are down for the third consecutive year. Annual increases in prescription drug expenditures for the family of four have declined to levels last seen just prior to the great hepatitis C treatment spike of 2015, and this year’s increase is 6 percent. Drug costs will continue to be prone to volatility, however, as new and expensive drugs enter the market, lower cost alternatives emerge, and drug price changes are deployed very quickly.

“Prescription drug costs have steadied, but this trend is volatile and hard to predict,” says Scott Weltz, a third co-author. “High-cost drugs can have a big impact on trends, as we witnessed a few years ago when hepatitis C treatments hit the market. Alternatively, point-of-sale rebates could push a consumer’s costs in the other direction, particularly for people taking high-cost drugs. As the environment evolves, changes in drug prices can be deployed quite quickly.”

Another finding: Employers are paying more, but employees are paying a lot more. Over the long-term, Milliman had seen employees footing an increasingly higher percentage of the total. That trend continues in 2018, with employee expenses increasing by 5.9 percent, while employer expenses increased by only 3.5 percent.