Benefits July 22, 2003

Milliman: HMOs Spike 14% Higher For 2004

July 22, 2003 (PLANSPONSOR.com) - Health Maintenance Organization (HMO) rate increases continue to be above the double-digit mark for 2004 (14%). However, if the preliminary results hold, the signs point toward a slowing of health care rate hikes.
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Even though the initial 2004 boost would mark the fifth year in a row of double-digit increases, overall it is 3% lower than last year’s survey results. Although, this may be of little comfort to employees at over 85% of those responding to the 12 th annual Milliman USA HMO Intercompany Rate Survey expecting increases over 10%.

“There are many contributing factors to the rise in health care costs,” noted Steve Cigich, author of the annual Milliman USA survey. Among those possible contributing factors, Cigich points to:

  • an aging population
  • rising rates of certain conditions like obesity, diabetes, and asthma
  • high medical malpractice litigation cost
  • health care workforce shortages
  • a move away from managed care
  • cost shifting impact from government health care programs
  • cost of HIPAA compliance
  • changing consumer attitudes and demands toward health care.

Due to these increases and the evolving nature of health care demands, Cigich sees the waves of change on the horizon for health care, particularly in the development of “consumer-driven approaches to health care, pay-for-performance models, and the movement of more cost sharing to employees as employers seek to reduce their health benefit costs.”

Earlier, the California Public Employees’ Retirement System (CalPERS) released a recommendation for an 18.4%-HMO price hike in 2004 (SeeCalPERS 2004 Health Coverage Price Hike Proposed at 18.4%).CalPERS, considered a bellwether of HMO rates due to its size as one of the nation’s largest health insurance buyers, reached the proposed contract terms with three not-for-profit HMO plans: Blue Shield of California, Kaiser Permanente and Western Health Advantage. Soon after CalPERS announcement, consulting house Hewitt came out with its projections for a 17.7% HMO rate hike in 2004 (See Hewitt Forecasts 17.7% HMO Rate Hike for 2004 ).

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