The projections show larger increases than were expected a month ago, but they are still relatively small compared to last year’s figures. Initial HMO rate increases are at 13.9%, up from the September projections of 13.7%. Last year’s number was 17.5%, significantly higher than those of this year.
The Southwest should be the hardest hit, with a 16.9% increase expected. This is unchanged since September. Following the Southwest, are the East (16%), the Midwest (14.4%), the Southeast (12.6%), and the West (12.3%).
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 that carry an average rate increase of 9.3% over existing 2004 rates. However, this number has risen since September, when the projected rate increase for alternative plan designs was 8.7%.