2009 HMO Cost Hikes Down from 2008

July 15, 2008 (PLANSPONSOR.com) - The good news for employers is that the rate of cost increases for health maintenance organizations (HMOs) is predicted to slow for 2009, but it is still out in front of inflation.

That was the word from Hewitt Associates which gathered HMO rate data from its Hewitt Health Resource site, which features data from 160 large companies with about 1 million participants.

A Hewitt news release said HMO premiums are forecast to rise 11.8% in 2009 compared to an estimated 13.2% in 2008 and 11.7% in 2007. After plan changes, negotiations, and terminations, final average HMO rates in 2008 increased by 9.4%.

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"While initial 2009 HMO premium rate increases remain high, we expect to see that employers will once again be able to reduce overall increases - by at least 2% or 3% - through aggressive negotiations, changes in plan offerings and designs, and an increased focus on employee health and productivity," said Jeff Smith, a senior consultant and co-leader of Hewitt's HMO rate analysis project, in the announcement. "As the economy continues to weaken, and because salary increases are expected to remain similar to last year, employers are becoming increasingly sensitive to the effect higher health care costs have on employee take-home pay and payroll deductions. As a result, we expect to see more companies move away from traditional employer strategies - such as employee cost-shifting - toward more aggressive and innovative steps that not only help mitigate health care costs, but also keep more money in employees' pockets."

Hewitt said its data shows a regional cost difference. While the Southeast region is expected to experience higher-than-average rate increases at 15.4%, the rate has declined from its 2008 level of 18.2%. Meanwhile, the Southwest region will have the lowest premium increase for 2009 at 7.3%, down almost 50% from 13.7% in 2008.