The goal of any business owner who provides employee benefits to their workers is to effectively balance cost with quality of coverage, ideally striking the perfect balance. However, whether due to the effects of the Affordable Care Act or the increasing expense of medical services, health care prices have risen in the past year, according to the results of a new report.
For the typical American family of four who have health benefits through their employer, their annual coverage costs average approximately $23,200, actuarial and consulting firm Milliman, Inc. found. That's up 5.4 percent from 2013, or the equivalent of just under $1,200.
The majority of these expenses fall on the employer. Roughly $13,500 is assumed by the company that makes these benefits available, while the employee picks up the difference through payroll deductions – or about $9,700.
Chris Girod, co-author of the Milliman Medical Index, noted that this year's report has a mix of good news and bad news.
"The good news is that the annual rate of increase has been declining for years," said Girod. "The bad news is that this represents yet another $1,100 jump in costs for this typical family.
He added that the average person or family would be hard-pressed to find a household expense that routinely increases by four figures on annual basis.
Rate of health cost increases down from 2013
At 5.4 percent, the cost surge is the lowest one recorded in the past 14 years, Milliman revealed, down a near full percentage point from 2013 when they rose by 6.3 percent. That's not something that eases the pain, however, for families who are already trying to stretch their dollar.
"Health care costs for this family have more than doubled over the past 10 years," said Sue Hart, co-author of MMI. "These costs have increased a total of 107 percent since 2004."
Lorraine Mayne, who also helped produced the Milliman report, said that from a standpoint of the employee, their costs have risen by approximately 32 percent, once you factor in payroll deductions and out-of-pocket expenses. This is despite the fact that in the past four years, premiums contributions from employers have jumped by 26 percent.
It's anyone's guess how much employer-sponsored coverage costs will fare over the upcoming years, according to Scott Weltz, co-author of the MMI. Perhaps the biggest determinant is the economy, which remains sluggish but does seem to be improving based on consumer sentiment and the gradual lowering of the unemployment rate.
"But there are others," said Weltz. "Provider risk sharing and increased transparency may contribute downward cost pressure. Specialty pharmaceuticals could introduce upward cost pressure."
He added that the ultimate effect of the ACA is still up in the air, as it could be a cost saver or detriment.
Not accounting for the increase in insured individuals may help explain why health costs are on the rise, as medical offices have limited resources. Since Jan. 1, when much of the ACA went into effect, roughly 50 percent of physicians have witnessed an increase in emergency room visits, according to a poll from the American College of Emergency Physicians.
