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Hewitt: HMO Rates Might Rise 13.7% In 2005

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NU Online News Service, June 4, 2004, 12:43 p.m. EDT – Health maintenance organization rate increases may run the gamut for large U.S. employers in 2005.[@@]

Preliminary figures suggest that the average increase might be about 13.7%, but tough negotiators could hold increases for some employers below 10%, according to Hewitt Associates Inc., Lincolnshire, Ill.

The preliminary increase forecast for 2004 was 17.5%, but large employers used plan changes, negotiations and other tactics to hold the actual average increase to 13%, Hewitt says.

Hewitt bases the preliminary increase forecasts on data from about 160 large employers with more than 1 million employees.

Hewitt health market experts are welcoming the drop in the preliminary increase forecast.

“We’re starting to see a moderation in health care premium increases, with the possibility of employers who aggressively manage their health care spending seeing increases in the single digits for the first time in 5 years,” says Ken Sperling, a Hewitt health care consultant.

The moderation is a sign that HMOs now have comfortable profit margins, Sperling says.

But many HMOs will be demanding double-digit rate increases, and employers are continuing to share more costs with employees, Hewitt reports.

The percentage of plans that have $20 copayments for office visits has increased to 16%, from 9% in 2003, while the percentage that offer $10 copayments has fallen to 29%, from 58% in 2002.

The percentage of plans that require a copayment greater than $50 for emergency room visits has increased to 33%, from 16% in 2003, Hewitt says.

Out-of-pocket costs are much higher for brand-name drugs off HMOs’ formularies. The percentage of plans that require a copayment greater than $30 for those drugs has increased to 38%, from 24% in 2003.