Healthcare costs top $31,000 for family of 4 in 2023

Published June 1, 2023 By Emily Olsen

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Dive Brief:

• Healthcare costs for a hypothetical family of four covered under an average employer-sponsored preferred provider organization plan will rise to $31,065 in 2023, according to the Milliman Medical Index. 
• Increasing costs are a long-term trend in healthcare, though the MMI noted expenses decreased for the first time in its history in 2020 as people deferred care. Still, increases came back up in 2021 and 2022 as the COVID-19 pandemic eased.
• The index projects healthcare costs will grow by about 5.6% for the hypothetical family from 2022 to 2023 as the industry continues to face changing labor market conditions, provider shortages, supply chain issues and new price transparency requirements.

Dive Insight:

First published in 2005 by actuarial firm Milliman, the MMI reflects healthcare costs for an American family made up of a 47-year-old man, a 37-year-old woman, a 4-year-old child and a baby under 1 year old. 

Inflation had a significant impact on costs this year, and the report notes medical inflation usually lags behind general inflation by six to 12 months. 

“While there have been some encouraging numbers on the general inflation front recently, we have a while before healthcare cost inflation catches up,” Doug Norris, co-author of the Milliman Medical Index, said in a statement.

Other factors affecting healthcare costs include the relatively strong labor market, where low unemployment and more job churn means employees are switching health plans more frequently. That could mean losing some benefits and navigating different levels of coverage and out-of-pocket costs on a new plan. 

Lingering supply chain disruptions and provider shortages have also taken their toll. Though health sector employment has improved, it still lags behind expectations and the improvements are uneven, with outpatient care centers, nursing care facilities and community care facilities facing more staffing shortages.

Though data published by insurers and providers under price transparency rules are still “daunting in size and challenging to interpret appropriately,” the MMI notes that information has the potential to make an impact on rising cost trends. 

“Hospitals and payers are now required to publish their negotiated reimbursement rates, a move that has the potential to create systemic change in the market dynamics — especially for employers that can harness the data to drive down costs,” Mike Gaal, another co-author of the index, said in a statement.

For individuals, average cost is projected to be $7,221 in 2023, increasing from $6,813 last year. About half of the average person’s healthcare expenses are for inpatient and outpatient hospital services, which the index projects will increase 4.2% this year due to more utilization and inflationary pressures. 

Employers will pay nearly 60% of their workers’ total healthcare costs this year. Their share of healthcare expenses will rise 7.2%, though employee costs will only rise 4.4% as their contributions won’t increase as quickly as overall healthcare costs.