NU Online News Service, Oct. 25, 2004, 2:10 p.m. EST

Health maintenance organizations expect their renewal rates to slow next year, while employers are showing keener interest in consumer-driven health plans, a new survey finds.[@@]

The 13th annual survey of group health insurance by Milliman Inc., Seattle, found a projected 2005 renewal rate increase of 11% for HMOs, down from 15% reported in the 2003 survey.

PPOs, which Milliman included in its survey for the first time, anticipated a 13% increase.

One reason for the HMO rate slowdown: administrative expenses dropped to 12% of premium, the lowest level ever reported in the survey, Milliman says.

The Milliman 2004 Group Health Insurance Survey covered HMOs and fully insured PPOs that serve the commercial large group employer market.

The survey found that HMO premiums increased by about 13% between 2003 and 2004 for plans reporting in both years.

89% of health plans responding to the survey expect to offer a consumer driven health plan to employers within the next year, Milliman found. That was up from 29% in last year’s survey. Health insurance executives expect around 8% of total 2005 commercial group premium revenue will come from CDH products, versus just over 3% in 2004, Milliman reports.

“Continued double digit increases and the recent Medicare Modernization Act are the likely drivers behind the movement to CDH approaches by insurers and employers alike,” says Steve Cigich, author of the survey.

The act introduced HSAs, which are tax-preferred savings vehicles that are used to offset the cost sharing associated with qualified high deductible health plans. While HSAs combined with HDHPs are considered a CDH plan solution, other CDH offerings may involve strategies using health reimbursement arrangements and flexible spending accounts.

The survey also reports that unit costs were higher for PPO plans than for HMOs. However, PPOs reported lower medical expense ratios and higher profitability than HMOs.