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Life Health > Health Insurance > Health Insurance

Employers Take Hard Line On HMO Costs

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Initial estimates show 2010 health maintenance organization premiums will increase by around 11.8%, according to a human resources consulting firm.

The result is consistent with last year’s projected rate increases and down from 13.2% percent in 2008, reports Hewitt Associates Inc., Lincolnshire, Ill. Final average HMO rates for 2009 increased by 9% after plan changes, negotiations and terminations.

While HMO rates continue to outrun inflation and general health care trends, employers have been able to cut these costs by 3% to 4% over the past few years through plan design changes, cost shifting and bargaining aggressively with health plans, said Maureen Fay, a Hewitt principal.

“Given these challenging economic conditions, we expect to see employers continuing to implement similar–if not more aggressive–strategies for 2010,” Fay said.

Hewitt expects HMO rate increases for 2010 will see less variation from region to region than it found in its past surveys. Still, it projects the Southwest to see the highest rate increases at 14%, up almost 100% from 7.3% this year. The West is expected to have the lowest premium increases at 11%, down from 12% in 2009.

In response to the rate increases, Hewitt expects some employers to continue to consolidate vendors under self-insured plans or terminate less efficient HMOs in favor of more efficient networks.

In other cases, some employers are choosing to eliminate HMO plans altogether. According to Hewitt’s data, 56.6% of employers offered HMOs in 2009, down from 59.1% in 2008.

Companies will also continue to shift a greater portion of health care costs to employees, Hewitt says. Between 2007 and 2009, employees’ out-of-pocket costs for large employer HMO offerings increased by 11% to 12% per year. By moving to percentage cost sharing formulas, rather than flat dollar cost-sharing, employers are able to share a greater portion of costs with their employees, the consultant notes.

Companies are also increasing payroll contributions for dependent health care coverage or applying surcharges to encourage dependent spouses to take coverage from their own employers. In addition, more than two-thirds of Hewitt clients have completed a dependent audit, have such an audit in process or are considering an audit. Such audits seek to remove dependents who don’t qualify for health plan coverage based on the employer’s eligibility requirements..


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