An annual report on the cost of health care prepared by Milliman, Inc. found that, for the first time in years, health care costs for the average American family fell in 2020. However, experts tell AIS Health that is unlikely to happen again any time soon, as the COVID-19 pandemic caused a steep decline in health care utilization.

The report, the 2021 Milliman Medical Index, found that the cost of health care for an average American family of four covered by an employer-sponsored PPO health plan was $26,078, down from $27,233 in 2019, a decrease of 4.2%. Milliman projects costs will increase to $28,256 in 2021.

Annie Man, Ph.D., a principal and consulting actuary at Milliman and one of the authors of the report, explains that “the decrease was driven mostly by health care utilization,” which dropped off sharply in the second quarter of 2020.

“The COVID pandemic actually added health care costs to the pool — COVID-related testing, treatment and vaccination costs,” Man says. However, that was offset as “elective care was put on hold for many people…as people put off going to the doctor due to the public emergency orders” from state and local officials, which barred patients from going to the hospital for nonemergent procedures.

Trevis Parson, chief actuary for North America health and benefits at Willis Towers Watson, says his firm also expects the cost of care to rebound this year.

“We fully expect that to snap back to where it was, if you look at where people were budgeting for 2020,” Parson says. “By the end of the year, we were already seeing recovery of claims on a monthly basis. So in many ways, the impact of the pandemic has been significantly smaller than it was in Q2 of 2020.”

According to the Milliman report, utilization was down across all categories of care — with the exception of prescription drugs. But the authors project future care to exceed 2019 levels going forward.

However, pharmacy costs continued to rise. Pharmacy expenses grew by 7.2% from 2019 to 2020, and Milliman expects that they will increase by 4.3% from 2020 to 2021.

by Peter Johnson