In a recently released report from Milliman, it was noted that the average family of 4 in the United States would pay approximately $20,000 this year in healthcare costs. However, here in the Chicago area, we rank 3rd in costs on this study, coming in at $23,551, or 113.6% of the national average. Only Miami and New York City ranked higher in costs of the 14 cities studied. The 2011 Chicago average was also already over $20,000, coming in at $21,996, or 113.4% of the 2011 average.
The annual Milliman Medical Index (MMI) measures the total cost of healthcare for a typical family of four covered by a preferred provider organization (PPO) plan. The index makes some basic assumptions, such as payroll deduction premiums and employer contributions, but it should give you a basic idea of the costs involved in your healthcare – something that should be in your sights as a cost that can be controlled, even reduced, by decisions you make throughout the year in terms of lifestyle, insurance benefit choices, etc.
Scott Weltz, a certified actuary with Milliman and one of the authors of this year’s study, suggests you look at it in terms of spending the equivalent of an average-sized sedan on your healthcare needs. Most Americans don’t realize the amount of money they spend on their healthcare each year, as claims filing with insurance sources and health savings accounts is done automatically. You may be used to having a check arrive in the mail (if you have a savings or spending account set up through your plan), with a brief statement telling what was paid, and how much you may owe your provider directly. You may not consciously be adding up those costs, or contemplating how you can save money in the future.
Currently the nation is awaiting a U.S. Supreme Court decision on the future of the Patient Protection and Affordable Care Act (PPACA), due the end of June. Based on that decision, consumers may see changes to their health care plans. PPACA institutes widespread changes to the healthcare system, with the primary focus on expanding coverage and on who should pay for those services. Healthcare cost drivers are based on the cost of services and the volume of services used. It has little focus on reducing overall healthcare spending for the representative family here covered by an employer-sponsored PPO.
Families receiving healthcare coverage through employers may have already noticed changes due to PPACA, most notably benefit eligibility for adult dependents up to age 26, preventive care coverage without any out-of-pocket cost sharing, and elimination of maximum benefit limits. Based on the court decision, these benefits may be eliminated, changed, or reduced in the future.
Another interesting concept that could be brought about with full implementation of PPACA is the concept of insurance exchanges. Under the current PPACA, each state will either implement an exchange, or the federal government will set one up and run it for them. You would then be able to purchase from a smorgasbord of plans and benefits directly. Some employers may simply decide to terminate healthcare coverage and possibly replace it with cash compensation. At that point, many consumers will be surprised to see the total premium cost because they have been insulated from the total cost of care by the employer subsidized plans they would be giving up.
What does all of this mean to the average family? It’s time to take charge of your healthcare, and your health. Many employers and insurance payors have been moving toward the concept of consumer driven health plans (CDHP). The easiest example of this is a high-deductible plan, coupled with a health savings account (HSA). You may have unconsciously already picked this plan, and made decisions based on it. The theory is that consumers will make more reasonable decisions and changes in healthcare and lifestyle based on paying more up front to save in premiums with a higher deductible Thinking back to the car analogy, when the price of gas goes up – we all look for money and mile-saving alternatives.
For instance, would you rather pay $100 for a newly- prescribed brand name drug, or $7.50 for its generic equivalent? Many more individuals are asking the pharmacist for the generic when it makes a big difference up front in the pocketbook.
Other things to consider when picking your next plan and making healthcare choices:
Your family needs – Do you have children under school age (immunizations, checkups, etc.)? Are your children about to leave home for college, marriage, etc.? Will you or your spouse qualify for Medicare shortly, or retire and be working with less income than currently? Do you have children that participate in sports, where injuries could be likely? What is your family history in terms of illnesses and conditions such as obesity, diabetes, heart problems, cancer, etc.?
All of the examples above are just some of the reasons why picking and living with a healthcare plan in the U.S. can seem complicated. There’s no “one size fits all” solution. But healthcare costs won’t be going down anytime soon, and American consumers can no longer afford to ignore it.