Benefits July 20, 2004

Hewitt Revises HMO Increase Figure for 2005

July 20, 2004 (PLANSPONSOR.com) - Large companies embroiled in the early stages of their health maintenance organization (HMO) renewal contracts are seeing projected rate increases for 2005 lower than this time last year.
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Initial HMO rates are averaging 13.6%compared to 17.5% at the same time in 2003, according to data aggregated by Hewitt Associates from Hewitt Health Resource, a Website that captures HMO rate information on behalf of 160 employersrepresenting more than 1 million employees and annual premiums of nearly$4 billion.Last month, Hewitt said HMOs will hike rates 13.7% in 2005 amidst signs that costs are “showing signs of moderation,” even though rate increases remained in the double-digits (See Hewitt: HMO Rates Up 14% in 2005 ).

By region, the highest increase projections appear concentrated in the Southeast (15.4%), followed by the Southwest (15.1%) and the East (13.6%). Conversely, the West (13.0%) and the Midwest are forecasts the smallest hikes.

Plan sponsors can be encouraged that cost-reduction strategies may be working. In 2004, the Lincolnshire, Illinois-based Hewitt found many companies made plan design changes, reducing their average rate increases to 11.2%. This strategy is continuing for 2005,with about one-third of employers requesting alternate plan designs thatcarry an average rate increase of 8.7% over existing 2004 rates.

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