Health Costs for Family of Four Average $23,215, Slowest Rate of Growth Since 2002

Employers pay the largest portion of healthcare costs, contributing $13,520 per year, or 58% of the total. However, increasing proportions of costs have been shifted to employees. Since 2007, when the economic recession began, the average cost to employers has increased 52% — an average of 6% per year — while the expenses borne by the family, through payroll deductions and out-of-pocket costs, have grown at an even faster rate, 73% (average of 8% per year).

(Milliman Medical Index)

Comments (23)

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  1. Devon Herrick says:

    Health Costs for Family of Four Average $23,215…

    While the slowing trend line is good news, I cannot get over the headline “Health Costs for Family of Four Average $23,215…”

    Does the average worker really understand $23,215 of his or her family’s income is being blown on health benefits? If they did I suspect most workers would demand a say in how it’s spent. More workers would demand less expensive high-deductible plans with an HSA.

    For the sake of argument, let’s assume the average family collectively sees the doctor 15 times during the year. They may have two or three prescription drugs among them. They also have a measure of financial protection. But is that really work $23,215?

    Of course, most of the funds are cross-subsidies to a few other people who have a laundry list of health ailments. But, sadly, the medical community has no incentives to control costs if these bills are mostly paid by willing coworkers. If workers were more cost conscious, the less healthy people would get squeezed. But, in turn they would squeeze the providers and THAT’S how costs are controlled (price sensitive customers who drive a hard bargain). That’s how it work in other markets where we consume goods and services.

  2. Elizabeth says:

    I barely make $23,000 a year. I can’t imagine spending all of that on health benefits.

  3. Matthew says:

    While employers are still paying the majority, with expenses that individuals pay are increasing, I suspect that individuals will find some way to cut costs.

    • John Fembup says:

      “employers are still paying the majority”

      Actually, Matthew, individuals are paying it all.

      That’s really the point that Devon Herrick makes, and that Milliman documents.

      The employer contribution is a form of compensation, just as wages are compensation. Both are costs of employment. You can be sure that is how employers figure it. Economists, too.

      Lower-cost medical care would reduce the cost of employment. Lower employment cost would permit the employer to increase wages; or hire more employees and increase production; or reduce prices; or increase margins; or all of these things.

      But there’s no doubt that individuals bear the entire burden of medical costs. (Just as consumers bear the entire burden of “corporate” taxes).

      • Bart I. says:

        Taxpayers are paying close to half, depending on various factors unrelated to health costs (employee’s federal and state tax bracket, whether he or she is in a cafeteria plan, etc.)

        • John R. Graham says:

          I appreciate the comment, but I must disagree. Employer-based benefits do incur what is officially defined as a “tax expenditure” because the benefit is exempt from income tax. However, the government does not actually give money to the beneficiary.

          When it comes to taxpayers actually paying for health care, that is relevant to Medicare, Medicaid, VA, etc.

          There is a world of difference between relieving taxes taken from a taxpayer (via a deduction or exemption) and using the general fund to pay for peoples’ health care.

          NCPA recommend a universal tax credit for working-age people. However, we would allow people who receive it to pay for Medicaid that way.

          • Bart I. says:

            I can appreciate the semantic difference, but I didn’t actually say that government was giving money to anyone. But it seems clear enough that taxpayers are financing the preferential treatment given to some individuals.

            The problem I have with a universal tax credit is that it’s not clear that there’s a need or that the benefit would justify the cost. If you’re going to give it to everyone, why not just reduce tax rates?

            • John R. Graham says:

              If tax rates are reduced, there will still be a demand for Medicaid and other programs for people who cannot afford health care. That is reality in a democracy.

              A universal tax credit is the best way to simplify all that.

      • John R. Graham says:

        Exactly! Every penny of that would go to the employee if benefits were owned by the individual. I wish Milliman would define it so, but they are actuaries, not economists.

      • Steve says:

        This is exactly right – “business” cannot pay costs – people pay. As Milton Friedman was famous for pointing out, employers, consumers, and employees all bear the burden of such costs. However, implying that “businesses” pay part of the costs while individuals pay the rest is a clever marketing tool for persuading employees that they are not being hurt as much as they really are.

  4. Thomas says:

    “Our MMI-illustrated family of four consists of a
    male age 47, a female age 37, a child age four, and a child under age one.”

    Is this really the average age range of a family of four? I tend to believe that parent ages would be much younger with children of such a young age. Younger parents would generally lead to less doctors visits.

    • James M. says:

      While they likely chose these ages in order to account for a wide array of possibilities, I wouldn’t call a family with these ages the typical average family of four.

      • Bill B. says:

        It would also depend on the variation of providers. Costs vary and locations with more competition are likely to have lower costs.

    • Buster says:

      male age 47, a female age 37

      This doesn’t sound plausible. A man and a women that old are generally too smart to be messing up their lifestyle having kids. How many dudes pushing 50 want to spend their time changing diapers when they could be out on the golf course?

      • Lacey says:

        Its does seem a little implausible, but not all that much so. If you look, the oldest child is 4. Doing the math, the man would’ve been around 42 and the woman around 32 when they started having kids.

        • Elizabeth says:

          So a little old, but in this day and age not unreasonable.

          • Lacey says:

            Not saying I want to try to have a baby at 32 and again at 36. But hey, whatever floats her boat, I guess.

    • Buddy says:

      Maybe Milliman has some sort of bias, choosing these ages to make health costs higher, since this “average family” doesn’t seem realistic.

      • John R. Graham says:

        They take the average premium they see. To “reverse engineer” that into a family of four, they have some actuarial challenges. For example, they have to adjust for the fact that there are many families without children, or with one child, or with four children, or with children not at home.

        So, to publish one number, that best represents the actuarial data that Milliman has, is a big challenge.

  5. Jimbino says:

    That $23,000 in health costs per family in a year does NOT represent what the family pays, but what is stolen from the paycheck of the young, single, non-breeding man and woman. It is what has driven me, throughout my career, to take only non-benefitted contract engineering jobs that pay me double what the poor captive suckers in the other cubicles earn in take-home pay, freeing me from having to subsidize all the breeding that is impoverishing our planet.