HMOs’ Rate Rises May Slow

As employees take on a greater share of healthcare costs, proposed rate increases at health maintenance organizations are at their lowest levels in more than five years.

Hewitt Associates, which Thursday released a study analyzing HMO rate increases expected for 2006, said they were worrisome in spite of the decline.

“The good news is that the rate of increase has declined but it is still troubling news that they’re increasing at double-digit rates,” well above inflation, said Paul Harris, senior healthcare strategist with the benefits consulting company.

Hewitt found that the current average rate of increase proposed by insurers nationwide for 2006 is 12.4%, compared with 13.7% proposed at this time last year for 2005. The proposed figure probably will change after companies and insurers complete their negotiations; the average HMO rate of increase for 2005 ended up at 9%.

The study is conducted by surveying 160 companies that represent an aggregate of more than 1 million employees.

Rate increases are down for a number of reasons, including the fact that employers have managed healthcare spending through plan design adjustments and aggressive negotiations, Harris said.

And companies are increasingly shifting healthcare costs to employees.

In 2005, a quarter of companies had plans that charged $20 co-payments for doctor visits, up sharply from 16% in 2004. At the same time, the percentage of companies with plans charging $10 co-pays declined, falling to 22% from 29% in 2004.

Pharmaceutical co-pays also are increasing. This year, 15% of companies had plans charging $15 co-pays for a brand name prescription on the employer’s suggested drug, down from 20% in 2004. Meanwhile, 35% had plans with $20 drug co-pays, up from 33% in 2004.

The Hewitt study found that HMO rates are expected to rise 15.8% in the Northeast, 9.4% in the Southeast, 11.7% in the Midwest, 13.5% in the Southwest and 10.9% in the West.