HMO rate increase slows
NEW YORK — As employees take on a greater share of health care 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 are 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,” said Paul Harris, senior health care strategist with the benefits consultancy.
Hewitt found that the current average rate of increase proposed by insurers nationwide for 2006 is 12.4 percent, compared to 13.7 percent proposed at this time last year for 2005. The proposed figure is likely to change after companies and insurers complete their negotiations; the average HMO rate of increase for 2005 ended up at 9 percent.
Harris noted that health care costs are still increasing at a higher rate than inflation.
Rates are down for a number of reasons, including the fact that employers have managed health care spending through plan design adjustments and aggressive negotiations, Harris said.
And companies are increasingly shifting health care costs to employees.
In 2005, a quarter of companies had plans that charged $20 co-payments for doctor visits, up sharply from 16 percent in 2004. At the same time, the percentage of companies with plans charging $10 co-pays declined, falling to 22 percent from 29 percent in 2004.
Pharmaceutical co-pays are also increasing. This year, 15 percent of companies had plans charging $15 co-pays for a brand name prescription on the employer’s suggested drug, down from 20 percent in 2004. Meanwhile, 35 percent had plans with $20 drug co-pays, up from 33 percent in 2004.
“Employers are very concerned about their budgets, so they need to share costs,” Harris said. “But they continue to shoulder the vast majority of health care costs.”
Harris said employers cover 80 percent of health care costs, and predicted that this percentage will change little even as employees pay more.
The Hewitt study found that HMO rates are expected to rise 15.8 percent in the Northeast, 9.4 percent in the Southeast, 11.7 percent in the Midwest, 13.5 percent in the Southwest and 10.9 percent in the West.
The final increases won’t be known until employer-insurer negotiations are completed.
“It will be an interesting evolution to see how the negotiations play-out and if the trends from last year continue, particularly in terms of cost-shifting,” Harris said.
The study is conducted by surveying 160 companies that represent an aggregate of more than 1 million employees.