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.

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.