Surprise! Family Health Insurance Isn't Getting Any Cheaper

By Maryalene LaPonsie on June 7th, 2010
Health Insurance

In an announcement that surprised no one, the 2010 Milliman Medical Index (MMI) revealed that medical coverage costs continue to rise. For the fifth straight year, the index reports that the average cost of health care for American families is increasing. The news doesn't bode well for those shopping for health insurance. As health care increases, medical insurance companies increase their premiums to cover their rising costs.

The 2010 Milliman Medical Index findings

The bottom line, according to the MMI, is that medical costs in 2010 for a typical family of four in America is projected to be $18,074, an increase of 7.9 percent from 2009. While the percentage increase is lower than in previous years, the dollar increase of $1,303 is the largest ever reported in the history of the MMI.

Of that $18,074, for families receiving employer sponsored group insurance, the cost breaks down as follows:

  • $10,744 - Employer Cost for Group Health Insurance
  • $4,325 - Employee Contribution to Group Health Insurance
  • $3,005 - Employee Out-of-Pocket Expenses

In addition, the MMI analysis provides details on which types of medical coverage are likely to increase by the greatest amount and why. The detailed categories compared by the MMI and their findings are:

  • Inpatient Hospital Care - 9.8 percent increase
  • Outpatient Hospital Care - 11.6 percent increase
  • Physician Services - 5.2 percent increase
  • Pharmacy Expenses - 6.1 percent increase

Interestingly, the MMI indicates that costs are not increasing because families are going to the doctor more often. Rather, individuals are using more expensive services and treatments, which lead to higher overall costs. For example, the average cost of inpatient hospital care has increased by $498 in the past year.

A final aspect of the MMI is its review of the health care and medical insurance costs found in different parts of the country. The index reviewed medical care costs for 14 major metropolitan areas and found significant differences in the cost of care.

Miami has highest health care costs

Miami continues to distinguish itself as the most expensive city in the nation for medical care. It costs a whopping $22,089 to provide health care for a Miami family of four. Miami is followed closely by New York City and Chicago. All three have health care costs in excess of 110 percent of the national average. On the other end of the spectrum, Phoenix offers bargain pricing at $16,071 per year.

Why the MMI matters for your family health insurance

While the MMI offers some interesting, if not startling, statistics, many Americans do not understand how these statistics affect their ability to find low cost health insurance. Quite simply, as health care costs go up, health insurance premiums go up.

Health insurance companies use complex formulas and actuarial calculations to determine their expenses and risk. Like all businesses, health insurance companies plan to make money. To do so, they need to charge enough in premiums payments to pay for their expected claims. If an insurance company knows that the cost of health care for a family of four will increase by 7.9 percent next year, chances are health insurance premiums will go up by at least as much.

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