Healthy HMO Price Hikes Hit Employer Pockets

September 20, 2000 ( - Health maintenance organization (HMO) premiums are expected to increase as much as 12% next year, putting additional cost pressures on employers.

The increases exceed medical cost increases that are expected to rise by 7.5% this year and 8.5% next, according to an analyst survey. 

Including the government HMO business such as Medicare and Medicaid, the average increase is anticipated at 10.5% for 2001, on top of the 9.25% increase this year.

The survey, conducted by Deutsche Banc Alex Brown, also revealed that employers are expecting like – or higher increases from HMOs in 2002.  That would be the fifth year of growing price increases for the industry.


The premium increases are a result of:

  • An older population
  • Technology investment
  • Higher drug costs
  • Litigation risks
  • Tougher rate negotiations from doctors and hospitals with HMOs

The increase in premiums could mean a significant jump in health care costs for employers who are already bearing the brunt of employees’ health insurance costs.

Many employers have elected to absorb benefit price increases, pressured by the need to attract/retain workers in the tight job market.

The survey looked at a random sample of health benefit managers at Fortune 500 companies and medium-sized employer groups.