Employers and consumers continue to pay more for health benefits from one year to the next, continuing a trend that is not auspicious for clinical laboratories and anatomic pathology groups

Most clinical laboratories don’t have the capability to collect payments from patients at time of service the same way patients pay doctors during office visits. Thus, Milliman’s annual report which details the increasing amounts patients are expected to pay out of their own pockets should be of interest to clinical laboratory managers and stakeholders. As this trend accelerates, labs will need to adopt new procedures and technologies to conduct business and remain profitable.

The Milliman Medical Index report (MMI) details how much consumers are predicted to pay for healthcare each year, as compared to previous years. Milliman, a Seattle-based independent actuarial and consulting firm with offices throughout the world, examines healthcare costs, property and casualty insurance, life insurance, financial services, and employee benefits.

Milliman released its first MMI in 2005. That year, the average annual medical cost for a family of four was $12,214.

Both Employees and Employers to See Increase in Healthcare Costs

The 2018 MMI report provides both good and bad news for the healthcare industry and patients. Milliman examined the costs for a typical family of four that participates in an employee-sponsored health insurance plan. For the report, a family of four consists of a 47-year old male, a 37-year old female, and two children under the age of five.

The MMI estimates a family of four will spend an average of $28,166 in healthcare expenditures in 2018. Included in this amount is the cost of the insurance paid by the employers and the employees, deductibles and out-of-pocket expenses. The figure represents an increase of $1,222 from 2017. The report found the amount families have been paying for healthcare has been increasing by an average of $100 per month over the last ten years.

The graphic above, taken from the 2018 Milliman Medical Index report, illustrates the increasing medical costs for a family of four. (Image copyright: Milliman.)

Both employers and employees will see an upsurge in costs from last year with employees experiencing an increase of 5.9% and employers seeing an increase of 3.5%.

The MMI found that employees will pay approximately 44% of their healthcare costs in 2018. By contrast, in 2008 employees paid less than 40% of their healthcare expenditures. In 2018, employers will pay about $15,788 of healthcare costs for a family of four, the employee will pay $7,674 via payroll deductions, with the remaining $4,704 being out-of-pocket expenses.

Costs Increasing While Growth Slows

The MMI also found that while the dollar amount families are spending on healthcare is increasing, the overall pace of the growth is slowing. The 4.5% rate of increase over last year is the slowest percentage growth in 18 years.

“We asked key stakeholders across the healthcare system what might be driving the decline in growth rates,” said Sue Hart, co-author of the MMI, in a Milliman news release. “Several common themes emerged, in particular provider engagement, more effective provider contracting, value-driven plan design, and spillover effects from public program initiatives.”

The reasons cited for this slowing trend include:

  • Involvement of healthcare providers to reduce costs;
  • More sophisticated contracting and provider consolidation;
  • Increased member cost sharing;
  • High deductible health plans;
  • Role of government and public programs; and the,
  • Impact of pharmacy initiatives.

“There are two ways of looking at this year’s MMI,” said Chris Girod, co-author of the Milliman Medical Index, in the news release. “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 healthcare costs for the typical American family.”

The MMI graphic above breaks down healthcare costs into their constituent categories. (Image copyright: Milliman.)

To explore how costs have grown, the MMI examined five separate components of services. The typical family of four spends:

  • 31% ($8,631) of their healthcare costs on inpatient facility care;
  • 29% ($8,257) on professional services;
  • 19% ($5,395) on outpatient facility care; and,
  • 17% ($4,888) on pharmacy services.

The remaining 4% ($995) of costs are spent on other services, such as:

  • Home healthcare;
  • Ambulance services;
  • Durable medical equipment; and,
  • Prosthetics.

The MMI measures costs for a typical family of four, but certain families or individuals may have variations in costs depending on such factors as age, gender, health status, geographic area, provider variation, and insurance coverage.

Prescription drug costs is one such variance that is hard to predict. The 2018 MMI determined drug costs for a family of four increased by 6%, which represents the lowest percentage increase since 2015.

“Prescription drug costs have steadied, but this trend is volatile and hard to predict,” said Scott Weltz, co-author of the MMI in the news release. “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.”

Scott Waltz (left), Christopher Girod (center), and Susan Hart (right) are Principles, Consulting Actuaries, for Milliman in Seattle. They co-authored the 2018 annual Milliman Medical Index report, which outlines the rising burden of out-of-pocket medical and insurance costs on patients, especially those on high deductible health plans. These costs are increasing and could impact clinical laboratories unprepared to collect fees at time of service. (Photo copyrights: Milliman.)


Preparing to Accept Payments

The results of this year’s MMI illustrate the impact increasing consumer costs could have on the way clinical laboratories conduct business and receive payments for services rendered. Studies have shown that patients with high deductible health plans (HDHPs), who frequently must pay 100% of lab costs, are especially affected by these trends. And the numbers of patients on HDHPs have increased each year since they were enacted.

Many clinical laboratories and anatomic pathology practices do not have the capability to collect fees from patients at the time of service. This lack of preparedness could threaten the survival of those labs and should be addressed.

—JP Schlingman

Related Information:

$28k: The Average Price a Family of Four Will Spend on Healthcare in 2018

2018 Milliman Medical Index

Milliman Medical Index: Healthcare Costs for Typical American Family Reach $28,166 Despite Low Annual Rate of Increase

Cost of Health Care for a Typical Family of Four Now over $28,000