Milliman: HMOs Up 11% in '05

July 13, 2004 ( - Health Maintenance Organizations (HM0) are forecast to have an 11% rate increase in 2005, down 3.8% from 2004's projections.

While lower than last year’s increase forecasts, if implemented, 2005 would mark the sixth year in a row of double-digit increases for HMOs. Additionally, initial readings for PPOs show an anticipated 2005 renewal rate increase of 12%, or 1% higher than HMOs, according to preliminary results from Milliman Associates’ 13th annual survey of HMOs.

“There are many contributing factors to the rise in health-care costs,” notes Steve Cigich, co-author of Milliman’s annual survey. “Possible contributing factors include an aging population, rising rates of 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, and changing consumer attitudes and demands toward health care.”

To help curb these costs, the Seattle-based Milliman says employers can look at a Consumer Driven Health-care option (CDH), tax preferred Health Savings Accounts (HSA) and tiered provider networks. Additional approaches, including pay-for-performance models and disease management programs seek to engage providers in a process to deliver better outcomes more efficiently.

“It is becoming clear that no single method is the silver bullet to delivering cost-effective healthcare. To achieve this goal, the incentives of the patient, provider, and insurer must be aligned properly,” adds Scott Weltz, the report’s other co-author. “Thus, we are beginning to see various consumer and provider controlled methods used in tandem to address the entire spectrum of health-care costs.”

Milliman is not the only consulting house to project double-digit health-care cost increases in 2005. Last month, Hewitt Associates said HMOs will hike rates 13.7% in 2005. Much like Milliman’s report, the Lincolnshire, Illinois-based Hewitt said costs are “showing signs of moderation,” even though rate increases remained in the double-digits (See Hewitt: HMO Rates Up 14% in 2005 ).

Milliman’s annual survey was sent to HMOs and fully insured PPOs that serve the commercial large group employer market. Preliminary results are based on response from 30% of those surveyed. Final results of the 2004 HMO/PPO/CDH Survey will be published in October and will include premium rates and trends by component, hospital inpatient cost and utilization data, physician reimbursement levels, medical expense ratios and profit levels.