Benefits June 13, 2006

Hewitt: HMO Rates Forecasted to Rise 11.7% in 2007

June 13, 2006 (PLANSPONSOR.com) - HMO rates are predicted to climb an average of 11.7% in 2007, compared with a 12.4% forecasted rise in 2006 and 13.7% in 2005, according to preliminary data from Hewitt Associates.
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The information was drawn from Hewitt Health Resource, a Web site that catalogues HMO rate data from 160 large companies.

“Although there has been a steady decline in the level of HMO rate increases over the past several years, double-digit increases are still very difficult for employers to absorb,” said Paul Harris, senior health care strategist, Hewitt Associates, in a news release. “The good news is that there do not appear to be market pressures that might cause rates to begin increasing again” he added.

The Southeast and West have shown slightly higher rate increases than other parts of the US. A preliminary analysis by Hewitt shows an 11% rate increase in the Southeast in 2007, compared with 9.4% in 2006. The Western region of the US had a predicted 13.7% uptick in 2007, compared with a 10.9% increase in 2006.

Although rates have been increasing at a slower pace, companies have gradually been shifting health care costs to employees in the form of rising copays for doctors visits and prescription drugs.

According to the news release, the number of companies offering $20 copays has continued to increase, from 16% in 2004, to 25% in 2005 and then up again to 29% in 2006. The number of companies offering $10 copays dropped to 17% in 2006, compared with 22% in 2005 and 29% in 2004.

Hewitt also found that employees are being asked to bear more of the price for their prescription drugs by increasing copays to control costs for specialty care and emergency room visits.

For instance, the number of employers who require more than a $50 copay for emergency room visits has increased to 52% in 2006, a significant increase from 33% in 2005, 16% in 2003 and 7% in 2001, while the number requiring only a $50 copay for emergency room visits has decreased to 32% in 2006, compared with 55% in 2005, according to the release.

Another recent study released on June 1 also forecasted a rise in health care costs. Aon Consulting found that costs are forecasted to increase by 12.2% for HMOs in the next year, 12.4% for PPOs plans and 11.9% for POS plans (See Survey Says Health Care Costs May Increase Again).

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