Insured workers' health costs still rising

NEW YORK (CNNMoney.com) -- Out-of-pocket costs for the millions of Americans with employer-based health coverage rose again in the past year, although at a slower pace than the year before, according to a new industry report released Tuesday.

However, as employers prepare to make health reform's mandated changes to their benefits plans later this year, the changes could shift some costs away from workers and raise them for companies.

American workers spent 7.4% more on their health care coverage over the past year, according to the sixth annual survey conducted by health care consulting firm Milliman Inc. The increase translates to about $506 more that workers contributed to their care - $321 for their company's health plan and $185 for employee out-of-pocket expenses.

But, in a bright spot for workers, the increase was lower than the 10.6% boost in the survey a year ago.

"Although employers are still bearing about 60% of their workers' health care costs, this is a pretty significant amount that employees are paying," said Lorraine Mayne, principal and consulting actuary with Milliman.

"If you think about a family of four with a household income of $50,000, they are paying about 8.7% of their income in employee contribution to their coverage," she said.

The report also showed that employers' subsidies on their workers' coverage increased about $797, or 8%, over the past year.

According to the Census Bureau, about 177 million Americans -- more than half the population -- are covered by employer-provided health insurance.

Under health reform, there are four major near-term changes that companies have to make to their coverage plan that will push up their share of health care costs.

These changes include expanding dependent coverage for adult children up to age 26, removing lifetime and annual limits, eliminating co-payments and co-insurance for certain preventive services, and prohibiting any restrictions of children's coverage for preexisting conditions.

"For many employees, these changes will increase the value of their benefits," said Mayne. "But for many others, those who don't have adult children for instance, the changes will have little effect."

Including both what employees pay and what employers contribute, the total 2010 cost of health care for a typical family of four increased 7.8% to $16,771, according to the Milliman report.

Physicians made up the biggest chunk, at 33% of total medical costs, according to the report. However, the rate of increase in physician costs declined to 5.2% from 6% in 2009.

The fastest growing component of health costs is hospital outpatient care, up 11.6%, compared to an increase of 10.2% the prior year. The report said the increase was driven by increases in the cost of care rather than people using the facility more.

Elsewhere, hospital inpatient costs increased by 9.8% and pharmacy costs rose 6.1%

In a look at 14 metropolitan areas, the report cited Miami, New York and Chicago as three cities where health care expenses are about 10% higher than the national average.

Total health care costs for a family of four exceeded $20,000 in those three cities, with Miami topping out at $22,089.

The Milliman Index is based on a national survey of more than 4,000 employers as well as data from the Kaiser Family Foundation.