Prescription drug costs drive rise in healthcare

By Matt Dunning, Crain News Service

WASHINGTON (May 20, 2015) — A sharp surge in prescription drug costs helped push healthcare costs for families insured under an average employer's health insurance plan up an estimated 6.3 percent in 2015, according to a new report by Milliman Inc.

The cost of healthcare coverage for a family of four under an employer-sponsored PPO plan — including premiums and out-of-pocket expenses — rose to $24,671 on average, reversing the streak of declining annual growth rates witnessed during the previous four years, the Seattle-based actuarial firm said May 19 in its annual “Milliman Medical Index” report.

The report's authors said the increased growth of healthcare costs for employer PPO-covered families — compared with a 5.4-percent rate of annual growth in 2014, the lowest in more than a decade — was due primarily to a 13.6-percent rise in prescription drug costs from 2014 to 2015 that resulted from the introduction of new specialty drugs, price increases on brand-name and generic prescriptions and an increase in the use of compound medicines.

“A combination of forces is creating the perfect pharmaceutical storm,” the report's authors wrote, noting that prescription drug costs account for approximately 15.9 percent — or $3,913 per family — of total annual healthcare costs for employer PPO-covered families. “Employers and families alike feel the financial consequences more than ever when a prescription is filled.”

The report also notes that employees and their families are shouldering a greater share of the cost of their healthcare than at any point since the passage of the federal healthcare reform law, and that their portion of the costs is growing at a faster annual rate than employers' portion.

Milliman's report estimates that employers pay approximately 57.5 percent of the cost of family coverage in 2015, compared with 59.4 percent in 2010, and that the annual growth rate of employees' combined premiums and out-of-pocket expenses has outpaced employers' year-over-year cost growth by as much as 1.3 percent in each of the last five years.

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This report appeared on the website of Crain's Business Insurance magazine, a Chicago-based sister publication of Tire Business.