Healthcare costs in the employer market have evolved dramatically over the past two decades, reshaping the responsibilities of both employers and employees. Recent data reports that employers’ share of premiums for single coverage ranges from 78% to 80%, compared to 2005, when employers covered close to 85%.
The Milliman Medical Index (MMI) offers valuable insight into these shifts, highlighting trends in total spending, cost-sharing dynamics, workforce impact, and what may lie ahead for employer-sponsored coverage.
Get a clear look at how cost-sharing has shifted over time and what the data suggest for future challenges and strategies.
Comprehending the Milliman Medical Index
What the MMI Measures and Why It Matters
The Milliman Medical Index measures the total annual healthcare costs for a typical American family of four who have employer-sponsored insurance. It includes expenses employers and employees pay, such as premiums, deductibles, and out-of-pocket costs.
By tracking these figures year over year, the MMI provides a complete view of cost trends in the employer market. This matters because it helps businesses, policymakers, and workers anticipate financial pressures and make more informed decisions about healthcare planning.
How the MMI Tracks Employer vs. Employee Healthcare Costs Over Time
The MMI breaks down healthcare spending into employer and employee contributions, showing how these shares have shifted. It separates premium costs, typically paid in part by both parties, from out-of-pocket expenses, such as deductibles and copays.
This long-term tracking reveals trends in cost distribution, showing whether employers or employees are shouldering more of the financial burden. These insights are essential for evaluating benefit strategies and anticipating future cost pressures in employer-sponsored plans.
The Evolution of Total Healthcare Costs in the Employer Market
Growth of Annual Healthcare Spending Per Family Since 2005
According to the MMI, the total annual healthcare cost for a family of four with employer-sponsored insurance has almost tripled since 2005. Healthcare costs for the average American family are projected to reach $35,119 in 2025, an average increase of 6.1% annually or 188% over 20 years.
The primary drivers of this increase, accounting for roughly 69% of the cost rise, are pharmacy and outpatient costs. This steady rise reflects increases in premiums, medical service costs, and prescription drug spending. While wages have grown modestly during the same period, healthcare expenses have outpaced income growth, putting added financial pressure on employers and employees.
Medical Inflation Compared to CPI and Wage Growth
Medical inflation has consistently outpaced the Consumer Price Index (CPI) and average wage growth over the past two decades. While general inflation and wages have increased moderately, healthcare costs have surged much faster. This widening gap has strained household budgets and employer benefit strategies alike. The MMI helps quantify this disparity, offering a clearer picture of how medical inflation contributes to the rising cost burden in employer-sponsored healthcare plans.
The Impact on Employers and Workforce Engagement
Awareness of the Total Cost of Coverage for Employees
The total cost of health insurance for employees goes beyond monthly premiums. Deductibles, copayments, and coinsurance now comprise a larger portion of household budgets. Deductibles have increased by nearly 50% in the last decade. As employers adjust their contributions, many workers are left paying a larger share of their healthcare costs. The MMI captures these rising expenses, making it clear that employees often experience significant financial strain even with insurance. The growing burden can affect job satisfaction, morale, and workforce engagement.
Balancing Cost Containment and Benefit Competitiveness
Employers experience the ongoing challenge of controlling healthcare spending while offering attractive benefits that retain and motivate talent. As costs rise, some shift more financial responsibility to employees, which can lead to dissatisfied and disengaged workers. Others invest in innovative plan designs or wellness programs to manage expenses without sacrificing value. The MMI helps employers assess these trade-offs, offering data to guide smarter decisions that balance fiscal responsibility with competitive, employee-friendly coverage.
Why Employee Communication Around Value and Cost Matters
Clear communication about healthcare benefits helps employees understand what they’re paying and receiving in return. When employees grasp the value of their coverage and how costs are shared, they’re more likely to appreciate the benefit and use it wisely. Transparent, consistent messaging can strengthen trust, improve engagement, and support smarter healthcare decisions.
Looking Ahead: What the MMI Suggests for the Future
Forecasting Future Cost Burdens for Employers and Employees
Specialty drugs, chronic condition management, and medical inflation are expected to drive expenses higher. For example, biologic and specialty drugs are projected to make up 50% of drug spending by 2030. Employers must consider strategic plan design, cost-sharing models, and employee support tools to manage these pressures while preserving workforce satisfaction and productivity in a changing healthcare market.
Opportunities for Strategic Plan Design Using Cost-Sharing Insights
The shifting balance of healthcare cost-sharing between employers and employees highlights the need for thoughtful, data-driven benefit strategies. Leveraging insights from the Milliman Medical Index allows businesses to design plans that control costs while maintaining strong, competitive coverage.
There are many effective ways to approach benefit plans that reduce financial strain without compromising employee well-being, such as smarter contribution models and value-based care options. Reach out to the experienced benefits consultants at New City Insurance for help building cost-effective benefit strategies that support both budgets and workforce engagement.