Smaller HMO Hikes Predicted

Rate increases for health maintenance organizations are set to decline in 2007 for the fourth consecutive year, but still create challenges for employers, according to a report released Tuesday.

Preliminary figures indicate that HMO rates will jump 11.7% next year, down from initial estimates of 12.4% in 2006 and 13.7% in 2005, said Hewitt Associates, a consulting firm based in Lincolnshire, Ill.

The report was based on a Hewitt website that captures initial rates that HMOs offer to employers; the actual rates often end up lower.

The average rate increase was 10% this year, and Hewitt believes that the jump will be about 7% or 8% next year.

Paul Harris, senior healthcare strategist for Hewitt, said the decelerating trend in rate increases resulted from discounts from providers and expanded provider networks. But he said the hikes “were still a major cost problem for employers.”

Harris said he expected employers to continue shifting some cost increases to employees. For example, the percentage of employers requiring a $5 co-payment for generic drugs fell to 23% this year, down from 46% in 2002.

By comparison, no companies required a $15 co-payment for generic prescriptions in 2002, but by this year 9% of employers did.

Meanwhile, the percentage of employers who require more than a $50 co-payment for an emergency room visit increased to 52% this year, up from 33% in 2005 and 16% in 2003.

The 2007 outlook was based on information from nearly 160 large companies employing more than 1 million people collectively.